Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng

Exercise 36

Abrams Company is a sole proprietorship. The book value of its identifiable net assets is $400,000, and the fair value of the same net assets is $600,000. It is agreed that the business is worth $850,000. What advantage might there be for the seller if the company is exchanged for the common stock of another corporation as opposed to receiving cash? Consider both the immediate and future impact.