Sugar Corp and Syrup Limited have reached an agreement in principle to combine their operations as of October 1,20X9.However,the Board of directors cannot decide on the best way to accomplish the combination.Below are the alternatives being considered:
1.Sugar acquires the net assets of Syrup for $1,700,000 cash.
2.Sugar acquires only the assets for $2,650,000 cash.
3.Sugar acquires all of the outstanding shares of Syrup by issuing shares with a fair market value of $1,700,000.
Syrup has the following assets and liabilities at October 1,20X9,(in thousands of dollars)

The only item that has a fair value different from its carrying value is the property,plant and equipment,which has a fair value of $1,900.
Required:
Explain how each transaction is different from the acquirer's point of view.Prepare the journal entry that would be recorded by Sugar for each these alternatives.

Question

Sugar Corp and Syrup Limited have reached an agreement in principle to combine their operations as of October 1,20X9.However,the Board of directors cannot decide on the best way to accomplish the combination.Below are the alternatives being considered:
1.Sugar acquires the net assets of Syrup for $1,700,000 cash.
2.Sugar acquires only the assets for $2,650,000 cash.
3.Sugar acquires all of the outstanding shares of Syrup by issuing shares with a fair market value of $1,700,000.
Syrup has the following assets and liabilities at October 1,20X9,(in thousands of dollars)
  
The only item that has a fair value different from its carrying value is the property,plant and equipment,which has a fair value of $1,900.
Required:
Explain how each transaction is different from the acquirer's point of view.Prepare the journal entry that would be recorded by Sugar for each these alternatives.

Quizplus · Accepted Answer

The Answer of Sugar Corp and Syrup Limited have reached an agreement in principle to combine their operations as of October 1,20X9.However,the Board of directors cannot decide on the best way to accomplish the combination.Below are the alternatives being considered:
1.Sugar acquires the net assets of Syrup for $1,700,000 cash.
2.Sugar acquires only the assets for $2,650,000 cash.
3.Sugar acquires all of the outstanding shares of Syrup by issuing shares with a fair market value of $1,700,000.
Syrup has the following assets and liabilities at October 1,20X9,(in thousands of dollars)
  
The only item that has a fair value different from its carrying value is the property,plant and equipment,which has a fair value of $1,900.
Required:
Explain how each transaction is different from the acquirer's point of view.Prepare the journal entry that would be recorded by Sugar for each these alternatives.

Sugar Corp and Syrup Limited Have Reached an Agreement in Principle