FA Module 17: Business combinations – homework assignment

(The attached PDF file has better formatting.)

Homework assignment: Corporate acquisition and goodwill methods

    ABC    XYZ
    Book Value    Fair Value    Book Value    Fair Value
Cash & Marketable Securities    100    100    30    30
Accounts Receivable    60    60    15    15
Inventory    80    105    40    45
Property, Plant, Equipment (Net)    500    800    200    240
Accounts Payable    130    130    55    55
Long-term Debt    320    290    80    70
Capital Stock (Par Value)    60        30    
Additional Paid-in Capital    140        65    


On December 31, 20X0, ABC issues a zero coupon bond for 100 and new common stock for 50 and pays 200 to acquire 80% of the stock of XYZ at its market price.

On ABC’s consolidated balance sheet at December 31, 20X0 (after the acquisition):

A.    What is inventory?
B.    What is property, plant, and equipment?
C.    What is long-term debt?
D.    What is common stock + additional paid-in capital?
E.    What are retained earnings?
F.    What is the full goodwill?
G.    What is the non-controlling (minority) interest for full goodwill?
H.    What is the partial goodwill?
I.    What is the non-controlling (minority) interest for partial goodwill?
J.    What is the debt-to-equity ratio?

Check your solutions with the practice problems on the discussion forum. The figures differ, but the formulas are the same.