Sugar Corp and Syrup Limited Have Reached an Agreement in Principle

question 17

Essay

Sugar Corp and Syrup Limited have reached an agreement in principle to combine their operations as of October 1,20X9.However,the Board of directors cannot decide on the best way to accomplish the combination.Below are the alternatives being considered:
1.Sugar acquires the net assets of Syrup for $1,700,000 cash.
2.Sugar acquires only the assets for $2,650,000 cash.
3.Sugar acquires all of the outstanding shares of Syrup by issuing shares with a fair market value of $1,700,000.
Syrup has the following assets and liabilities at October 1,20X9,(in thousands of dollars)

The only item that has a fair value different from its carrying value is the property,plant and equipment,which has a fair value of $1,900.
Required:
Explain how each transaction is different from the acquirer's point of view.Prepare the journal entry that would be recorded by Sugar for each these alternatives.

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Definitions:

Marginal Utility

The additional satisfaction or utility gained by consuming an additional unit of a good or service.

Income Elasticity

It quantifies the sensitivity of the quantity demanded for a good to a change in consumer incomes, highlighting how demand varies as income levels shift.

Price Elasticity

A measure of the responsiveness of the quantity demanded or supplied of a good to a change in its price.

Supply

The total quantity of a product or service that is available for purchase at a given price and time.