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In: Accounting

Jones Company obtains all of the common stock of Hudson, Inc., by issuing 50,000 shares of...

Jones Company obtains all of the common stock of Hudson, Inc., by issuing 50,000 shares of its own stock. Under these circumstances, why might the determination of a fair value for the consideration be difficult?

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Expert Solution

Determination of fair value for the consideration be difficult because:-

1. Jones might be a closely held company and therefore, not fair value can be estimated.

2. Shares of Jones might be new and hence fair value is not available.

3. Jones' stock is historically so stable that its value cannot be judged.

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