Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Question
Chapter 2, Problem 2.1.2C
To determine
Business combination:
Business combination refers to the combining of one or more business organizations in a single entity. The business combination leads to the formation of combined financial statements. After business combination, the entities having separate control merges into one having control over all the assets and liabilities. Merging and acquisition are types of business combinations.
Push-down accounting:
It refers to process about subsidiary’s recording of the fair-value allocations as well as subsequent amortization in its books of accounts.
The fair value of the asset:
The fair value of the asset is the amount at which two parties may enter into an agreement with an open hand.
:
Identify the accounting methods which would be recommended if the deals are completed.
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Consider the following premerger information about a bidding firm (Firm B) and a target
firm (Firm T). Assume that both firms have no debt outstanding.
Firm B Firm T
1,300
$23
Shares outstanding 5,400
Price per share
$53
Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is
$7,900. Firm T can be acquired for $25 per share in cash or by exchange of stock
wherein B offers one of its share for every two of T's shares.
Are the shareholders of Firm T better off with the cash offer or the stock offer?
O Share offer is better
O Cash offer is better
At what exchange ratio of B shares to T shares would the shareholders in T be
indifferent between the two offers? (Do not round intermediate calculations and round
your answer to 4 decimal places, e.g., 32.1616.)
Exchange ratio
Company A considers acquiring company B. Shares of the company A
trade at $30 and there are 5,000 of A shares outstanding. Company B
has 200 shares outstanding worth $100 each. If A acquires B, then the
resulting synergy will amount to $10,000.
Suppose A offers to exchange every B's share for $130 in cash. What will
be the total benefit for the existing shareholders of B?
Consider the following premerger information about a bidding firm (Firm B) and a target
firm (Firm T). Assume that both firms have no debt outstanding.
Shares outstanding
Price per share
Firm B
5,000
$ 42
Firm T
1,600
$17
Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is
$9,000. Firm T can be acquired for $19 per share in cash or by exchange of stock
wherein B offers one of its share for every two of T's shares.
a. Shareholders of Firm T
b. Exchange ratio
a. Are the shareholders of Firm T better off with the cash offer or the stock offer?
b. At what exchange ratio of B shares to T shares would the shareholders in T be
indifferent between the two offers? (Do not round intermediate calculations and
round your answer to 4 decimal places, e.g., 32.1616.)
to 1
Chapter 2 Solutions
Advanced Accounting
Ch. 2 - Prob. 1UTICh. 2 - Prob. 2UTICh. 2 - Prob. 3UTICh. 2 - Prob. 4UTICh. 2 - Prob. 5UTICh. 2 - Prob. 6UTICh. 2 - Santos Corporation is considering investing in...Ch. 2 - Prob. 2.1ECh. 2 - Prob. 2.2ECh. 2 - Prob. 3.1E
Ch. 2 - Prob. 3.2ECh. 2 - Prob. 4.1ECh. 2 - Prob. 4.2ECh. 2 - Prob. 4.3ECh. 2 - Prob. 5.1ECh. 2 - Prob. 5.2ECh. 2 - Prob. 6.1ECh. 2 - Prob. 6.2ECh. 2 - Prob. 7.1ECh. 2 - Prob. 7.2ECh. 2 - Prob. 8.1ECh. 2 - Prob. 9.1ECh. 2 - Prob. 9.2ECh. 2 - Prob. 9.4ECh. 2 - Prob. 2A.1AECh. 2 - Prob. 2.1.1PCh. 2 - Prob. 2.1.2PCh. 2 - Prob. 2.2.1PCh. 2 - Prob. 2.2.2PCh. 2 - Prob. 2.2.3PCh. 2 - Prob. 2.3.1PCh. 2 - Prob. 2.3.2PCh. 2 - Prob. 2.3.3PCh. 2 - Prob. 2.4.1PCh. 2 - Prob. 2.4.2PCh. 2 - Prob. 2.4.3PCh. 2 - Prob. 2.5.1PCh. 2 - Prob. 2.5.2PCh. 2 - Prob. 2.5.3PCh. 2 - Prob. 2.6.1PCh. 2 - Prob. 2.6.2PCh. 2 - Prob. 2.7.1PCh. 2 - Prob. 2.7.2PCh. 2 - Prob. 2.8.1PCh. 2 - Prob. 2.8.2PCh. 2 - Prob. 2.9.1PCh. 2 - Prob. 2.9.2PCh. 2 - Prob. 2.10.1PCh. 2 - Prob. 2.11.1PCh. 2 - Prob. 2.12.1PCh. 2 - Prob. 2.12.2PCh. 2 - Prob. 2.13.1PCh. 2 - Prob. 2.13.2PCh. 2 - Prob. 2.14.1PCh. 2 - Prob. 2.14.2PCh. 2 - Prob. 2.15.1PCh. 2 - Prob. 2.15.2PCh. 2 - Prob. 2A.1.1APCh. 2 - Prob. 2A.1.2APCh. 2 - Prob. 2.1.1CCh. 2 - Prob. 2.1.2C
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