Problem - Paul, Inc. acquired 100% of Ernie's Inc. net assets on January 1, 2009 for $300,000 in cash and paid 10,000 for acquisition cost. The following facts relate to the acquisitions:
Accounts Receivable 50,000
Inventory 80,000
Equipment, Net 50,000
Land and Building, Net 120,000
Total Assets $300,000
Bonds Payable 90,000
Common stock 100,000
Retained earnings 110,000
Total Liabilities and Stockholders' Equity $300,000
Fair value of acquired net assets:
Accounts receivable $50,000
Inventory 100,000
Equipment 30,000
Land and building 180,000
Customer list 30,000
Bonds payable 100,000
In 3-5 pages, complete the following:
1. Determine and provide the proper accounting entry to record the subsidiary on Paul's books on January 1, 2009 as if Ernie was dissolved.
2. Determine and provide the proper accounting entry to record the subsidiary on Ernie's books on January 1, 2009 as if Ernie was dissolved.
3. While acquisitions are often friendly, there are numerous occasions when a party does not want to be acquired. Discuss possible defensive strategies that firms can implement to fend off a hostile takeover attempt.