What is the book value of the net assets

Reference no: EM132846977

Question 1 - Company A issues 250 shares of its common stock for all of the outstanding common shares of Company B. After the transaction, the board of directors and senior management of Company A will comprise an equal number of representatives of former Company A and former Company B. Each company has fewer than 20 individual shareholders before the transaction. Here is some pre-transaction information for the two companies: Company A Company B # shares of common stock outstanding company A150 and company B 800

Book Value of net assets company A $100,000 and company $100,000 Fair value of entity company A $300,000 and Company B $500,000

Required -

1. Under FASB ASC 805, which company is the acquiring entity? Why?

2. What is the book value of the net assets of the combined businesses after the transaction is accounted for according to FASB ASC 805?

Question 2 - Company X issues its common stock to the stockholders of Company Z in exchange for all of the outstanding common stock of Company Z. The original stockholders of Company X will have 51% of the voting interests of the combined entity (there are no other equity instruments outstanding at Company X or Z). Some additional facts: The Board of Directors will consist of 5 directors from Company Z and 4 from Company X, all with 5-year terms. A two-thirds vote of the ownership interests is required for the removal of Board members. Senior management will consist of one member from Company X (Chairman) and two members from Company Z (CEO and CFO). ? All other relevant factors to consider in the transaction are neutral (i.e., they do not favor either party as the accounting acquirer).

Required -

1. Which company is the accounting acquirer and why?

2. This question is independent from #1. Assume the original facts plus this additional fact: One preexisting Company X shareholder owns 30% of the outstanding shares of the combined entity. This shareholder was given veto rights over the composition of the combined entity's Board of Directors. Which company is the accounting acquirer and why?

Reference no: EM132846977

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