Reverse Acquisition On January 1, 20X2, the shareholders of Untraded Company request 6,000 Traded shares in exchange for all of their 5,000 shares. This is an exchange ratio of 1.2 to 1. The fair value of a share of Traded Company is $60. The acqui- sition occurs when the two companies have the following balance sheets:
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Untraded Company (the acquirer) Balance Sheet
December 31, 20X1
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Assets
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Liabilities and Equity
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Current assets .
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$ 10,000
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Long-term liabilities . .
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$ 5,000
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Building (net) . .
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150,000
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Common stock ($1 par), 5,000 shares . .
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5,000
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Equipment (net) . .
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100,000
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Paid-in capital in excess of par .
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115,000
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Retained earnings .
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135,000
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Total assets. .
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$260,000
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Total liabilities and equity .
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$260,000
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Traded Company (the acquiree) Balance Sheet
December 31, 20X1
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Assets
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Book Value
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Fair Value
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Liabilities and Equity
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Book Value
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Fair Value
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Current assets
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$ 5,000
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$ 5,000
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Long-term liabilities
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$ 10,000
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$10,000
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Building (net)
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100,000
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200,000
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Common stock ($1 par), 4,000 shares
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4,000
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Equipment (net)
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20,000
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40,000
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Paid-in capital in excess of par
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96,000
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Retained earnings
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15,000
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Total assets
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$125,000
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$245,000
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Total liabilities and equity
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$125,000
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1. Prepare an appropriate value analysis and a determination and distribution of excess schedule.
2. Complete a consolidated worksheet for Untraded Company and its subsidiary, Traded Company, as of January 1, 20X2.