Fluent Essays

Due on Wednesday, September 1st, at 10 PM, US central time (Chicago) Instruction and film just check the attachments below. Instruction: 1. Use the High-Engagement Module 2 Case Study file to answer the questions in the High Engagement Module 2 For Case Study document.  2. When answering each question, need to not where the explanation comes from (for example: According to ASC 805-40-30-1, etc.) 3. No how many words required but need clearly answer. Due on Wednesday, September 1st, at 10 PM, US central time (Chicago) High Engagement – Module 2 Reverse Acquisition From FASB Codification ASC 805-40-30-1: All of the measurement principles applicable to business combinations in Subtopics 805-10, 805-20, and 805-30 apply to a reverse acquisition. Measuring the Consideration Transferred ASC 805-40-30-2: In a reverse acquisition, the accounting acquirer usually issues no consideration for the acquiree. Instead, the accounting acquiree usually issues its equity shares to the owners of the accounting acquirer. Accordingly, the acquisition-date fair value of the consideration transferred by the accounting acquirer for its interest in the accounting acquiree is based on the number of equity interests the legal subsidiary would have had to issue to give the owners of the legal parent the same percentage equity interest in the combined entity that results from the reverse acquisition. The fair value of the number of equity interests calculated in that way can be used as the fair value of consideration transferred in exchange for the acquiree. Consolidated Financial Statements Following a Reverse Acquisition ASC 805-40-30-4: Paragraph 805-40-45-1 provides guidance on required adjustments to the accounting acquirer's legal capital to reflect the legal capital of the legal parent (accounting acquiree) in the consolidated financial statements following a reverse acquisition. Preparation and Presentation of Consolidated Financial Statements ASC 805-40-45-1: Consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent (accounting acquiree) but described in the notes as a continuation of the financial statements of the legal subsidiary (accounting acquirer), with one adjustment, which is to retroactively adjust the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree. That adjustment is required to reflect the capital of the legal parent (the accounting acquiree). Comparative information presented in those consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent (accounting acquiree). ASC 805-40-45-2: Because the consolidated financial statements represent the continuation of the financial statements of the legal subsidiary except for its capital structure, the consolidated financial statements reflect all of the following: a. The assets and liabilities of the legal subsidiary (the accounting acquirer) recognized and measured at their precombination carrying amounts. b. The assets and liabilities of the legal parent (the accounting acquiree) recognized and measured in accordance with the guidance in this Topic applicable to business combinations. c. The retained earnings and other equity balances of the legal subsidiary (accounting acquirer) before the business combination. d. The amount recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary (the accounting acquirer) outstanding immediately before the business combination to the fair value of the legal parent (accounting acquiree) determined in accordance with the guidance in this Topic applicable to business combinations. However, the equity structure (that is, the number and type of equity interests issued) reflects the equity structure of the legal parent (the accounting acquiree), including the equity interests the legal parent issued to effect the combination. Accordingly, the equity structure of the legal subsidiary (the accounting acquirer) is restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent (the accounting acquiree) issued in the reverse acquisition. e. The noncontrolling interest’s proportionate share of the legal subsidiary’s (accounting acquirer’s) precombination carrying amounts of retained earnings and other equity interests as discussed in paragraphs 805-40-25-2 and 805-40-30-3 and illustrated in Example 1, Case B (see paragraph 805-40-55-18). High Engagement – Module 2 Reverse Acquisition – Exercise 1: On January 1, 2018, Company A acquired 100% of Company B by issuing 3,000 shares of its own common stock. Company A and B are both publicly traded companies. On the transaction date, the listed per share stock prices of Company A and B, were $130 and $60, respectively. The following are the condensed balance sheets of A and B, and the fair values of companies’ assets and liabilities just prior to the transaction. Abbreviation: Carrying amount = “CA”, Fair value = “FV”, Additional paid in capital = “APIC” 1/1/2018 Balance Sheet Company A: CA FV CA FV Current assets $55,000 $60,000 Liabilities $40,000 $70,000 Noncurrent assets 85,000 140,000 Equity Retained Earnings 80,000 Common Stock ($1 Par value) 2,000 APIC 18,000 Total Assets $140,000 Total liabilities and Equity $140,000 1/1/2018 Balance sheet Company B: CA FV CA FV Current assets $90,000 $120,000 Liabilities $100,000 $150,000 Noncurrent assets 210,000 380,000 Equity Retained Earnings 140,000 Common Stock ($1 Par value) 6,000 APIC 54,000 Total Assets $300,000 Total liabilities and Equity $300,000 (1) What company in this transaction is the legal acquirer, the accounting acquirer, and the accounting acquiree? (2) Use FASB codification and prepare the consolidated financial statements that should be reported by Company A on January 1, 2018. (a) At what amounts the current assets, noncurrent assets, and liabilities should be reported in the consolidated balance sheet on January 1, 2018? January 1, 2018 Company A Company B Consolidated Financial Statements Current assets Noncurrent assets Liabilities Total (b) At what amount the goodwill should be reported in the consolidated balance sheet on January 1, 2018? (c) At what amounts the equity accounts should be reported in the consolidated balance sheet on January 1, 2018? (1) Retained earnings: (2) Common stock: (3) Additional-paid-in-capital: Consolidated balance sheet on January 1, 2018 : Current assets Liabilities Noncurrent assets Equity Goodwill Retained Earnings Common Stock ($1 Par value) APIC Total Assets Total liabilities and Equity Roll-up transaction - Exercise 2: Using the data from the exercise 1, assume that Company C was specifically formed to effect the business combination. On January 1, 2018, Company C issued: · 4,000 shares of its own common stock for 100% of Company A’s common stock and · 6,000 shares of its own common stock for 100% of Company B’s common stock. What company is the legal acquirer, accounting acquirer, and the accounting acquiree in this transaction? ASC 805-10-55-15: A new entity formed to effect a business combination is not necessarily the acquirer. If a new entity is formed to issue equity interests to effect a business combination, one of the combining entities that existed before the business combination shall be identified as the acquirer… 7