Reference no: EM132595556

Question - On February 1, Piscina Corporation completed a combination with Swimwear Company. At that date, Swimwear's account balances were as follows:

Book Values Fair Values

Inventory $925,000 $989,000

Land 710,000 1,024,000

Buildings 1,210,000 1,324,000

Unpatented technology 0 1,705,000

Common stock ($10 par value) (750,000)

Retained earnings, 1/1 (1,967,000)

Revenues (768,000)

Expenses 640,000

Piscina issued 20,000 shares of its common stock with a par value of $25 and a fair value of $280 per share to the owners of Swimwear for all of their Swimwear shares. Upon completion of the combination, Swimwear Company was formally dissolved.

Prior to 2002, business combinations were accounted for using either purchase or pooling of interests accounting. The two methods often produced substantially different financial statement effects. For the scenario above,

1. What are the respective consolidated values for Swimwear's assets under the pooling method and the purchase method?

2. Under each of the following methods, how would Piscina account for Swimwear's current year, but prior to acquisition, revenues and expenses?