Mergers and Acquisitions Paper 8

1

In a business acquisition, consideration transferred includes which of the following?
I. The fair value of assets transferred by the acquirer.
II. The fair value of the liabilities incurred by the acquirer.
III. The fair value of contingent consideration transferred by the acquirer.
IV. The fair value of the equity interests issued by the acquirer as a part of the acquisition.
V. The fair value of share-based payments voluntarily exchanged for outstanding share-based payment awards of the acquiree.






2

On June 30, year 1, Wyler Corporation acquires Boston Corporation in a transaction properly accounted for as a business acquisition. At the time of the acquisition, some of the information for valuing assets was incomplete. How should Corporation Wyler, account for the incomplete information in preparing its financial statements immediately after the acquisition?






3

When does the measurement period end for a business combination in which there was incomplete accounting information on the date of acquisition?






4

Ross Corporation recorded a provisional amount for an identifiable asset at the date of its acquisition of Layton Inc. because the asset’s fair value was uncertain. Before the measurement period ends, Ross obtains new information that indicates that the asset was overvalued by $20,000. How should Ross report the effects of this new information?






5

Able Corp. acquires Bailey Company in a transaction that is properly accounted for as a business acquisition. The acquisition contract and Bailey’s share-based compensation agreement require Able stock to be exchanged for Bailey common stock issued to Bailey’s employees as share-based payments. No further service is required by the employees of Bailey to qualify for the replacement awards. How should Able account for the shares of stock issued as replacement awards to employees of Bailey?






6

On January 1, year 1, Post Inc. acquires Sam Company in a transaction properly accounted for as a business combination. Sam’s employees have share-based payments that will expire as a consequence of the business combination. In order to maintain employee morale, Post voluntarily replaces the awards to employees 30 days after the date of acquisition. How should Post account for the replacement awards given to Sam’s employees?






7

When should an acquirer derecognize a contingent liability recognized as the result of an acquisition?






8

On September 1, year 1, Phillips, Inc. issued common stock in exchange for 20% of Sago, Inc.’s outstanding common stock. On July 1, year 2, Phillips issued common stock for an additional 75% of Sago’s outstanding common stock. Sago continues in existence as Phillips’ subsidiary. How much of Sago’s year 2 net income should be reported as attributable to Phillips?






9

On September 1, year 1, Phillips, Inc. issued common stock in exchange for 20% of Sago, Inc.’s outstanding common stock. On July 1, year 2, Phillips issued common stock for an additional 75% of Sago’s outstanding common stock. Sago continues in existence as Phillips’ subsidiary. How much of Sago’s year 2 net income should be reported as attributable to Phillips?






10

Mr. & Mrs. Dart own a majority of the outstanding capital stock of Wall Corp., Black Co., and West, Inc. During year 1, Wall advanced cash to Black and West in the amount of $50,000 and $80,000, respectively. West advanced $70,000 in cash to Black. At December 31, year 1, none of the advances was repaid. In the combined December 31, year 1 balance sheet of these companies, what amount would be reported as receivables from affiliates?






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