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?

Solutions

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.

Hi mate,

I would be grateful to you if you can provide a thumbs up and write one beautiful comment. It will improve my rating and let me continue my journey here.

In case of doubt, please comment. I will consider myself fortunate if I can help you.

All the best for your bright future.

Be safe from the corona. Wear a mask before going out and wash hands frequently especially before touching the face

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

A. Liu Company acquires Heller, Inc., by issuing 30,000 shares of $1 par common stock with...

A. Liu Company acquires Heller, Inc., by issuing 30,000 shares of $1 par common stock with a market price of $22 per share on the acquisition date and paying $150,000 cash. The assets and liabilities on Heller’s balance sheet were valued at fair values except equipment that was undervalued by $225,000. There was also an unrecorded patent valued at $45,000, as well as an unrecorded trademark valued at $60,000. In addition, the agreement provided for additional consideration, valued at $50,000,...

Pealand Company has 50,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding....

Pealand Company has 50,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding. The common stock is $1.00 par value. The preffered stock has a $100 par value, a 5% dividend rate, and is noncumulative. On October 31, 2015, the company declares dividends of $0.25 per share for common. Provide the journal entry for the declaration of dividends.

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9...

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9 per share. Subsequently, the company declared and issued a 10% stock dividend. The market price of the shares is $20 per share. 53. What is the effect of the dividend on Paid in Capital? a. Paid-in Capital decreased b. Paid-in Capital increased c. Paid-in Capital remained the same d. None of the above 54. Refer to the previous question. By what amount did Paid...

A company with 50,000 authorized shares of $1 par common stock issued 10,000 shares at $10...

A company with 50,000 authorized shares of $1 par common stock issued 10,000 shares at $10 per share, Subsequently, the company declared and paid a $3 cash dividend per share. On the date the company declared the dividend, the market price of the shares was $30 per share. What is the effect of the dividend on Retained Earnings? Retained earnings decreased Retained earnings increased Retained earnings remained the same None of the above. Refer to the previous question. By what...

On January 1, 2012, Raiders Company had 50,000 shares of common stock outstanding and 10,000 shares...

On January 1, 2012, Raiders Company had 50,000 shares of common stock outstanding and 10,000 shares of 7%, $100 par, cumulative preferred stock outstanding. The preferred stocks are convertible to 50,000 shares of common stocks. Raiders reported net income of $400,000. The income tax rate is 30%. Also outstanding at January 1, 2012 were fully vested incentive stock options giving key employees the option to buy 20,000 common shares at $20. The market price of the common shares averaged $40...

On January 1, 2012, Raiders Company had 50,000 shares of common stock outstanding and 10,000 shares...

The costs of issuing common shares: a. They are recorded in a separate account (unamortized stock...

The costs of issuing common shares: a. They are recorded in a separate account (unamortized stock issue costs) and amortized over a period of no more than 10 years b. They are posted to a separate account but are not amortized unless the company withdraws the shares c. They are subtracted from the capital paid in excess (additional paid-in capital) d. They are accounted for as an expense as incurred 2. When a company issues shares (common or preferred) in...

Dinkel Concrete acquired the outstanding common stock of Pink paying $1,350,000 for 50,000 shares ston, Inc....

Dinkel Concrete acquired the outstanding common stock of Pink paying $1,350,000 for 50,000 shares ston, Inc. on January 1, 2017, by e Pinkston declared and paid a S0 50 per share cash dividend on December 31, 2017 ePinkston reported net income of $600,000 for the year At December 31, 2017, the market price of Pinkston's common stock was $30 per share. " Dinkel has the intent to sell the Pinkston investment sometime in the future and therefore classifies its investment...

McKinley Company owns 15,000 of the 50,000 outstanding shares of Ranier Corporation common stock and can...

McKinley Company owns 15,000 of the 50,000 outstanding shares of Ranier Corporation common stock and can exert significant influence over Ranier. During 2022, Ranier earns $350,000 and pays cash dividends of $140,000. What is the 2022 effect on McKinley’s Retained Earnings? Select one: a. $63,000 b. $147,000 c. $105,000 d. $56,000 e. $42,000

On December 31, 2016, Gary Company had 50,000 shares of common stock outstanding for the entire...

On December 31, 2016, Gary Company had 50,000 shares of common stock outstanding for the entire year. On March 1, 2017, Gary purchased 2,400 shares of common stock on the open market as treasury stock paying $45 per share. Gary sold 600 of the treasury shares on June 1, 2017, for $47 per share. Gary issued a 10% common stock dividend on 7/2/2017. In addition, Gary had 3,000 shares of 9%, $50 par value, noncumulative convertible preferred stock outstanding at...

Subjects