Sugar Corp and Syrup Limited Have Reached an Agreement in Principle

question 12

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).
$$\begin{array} { | l | r | } \hline & \$ \\\hline \text { Cash } & 50 \\\hline \text { Accounts receivable } & 230 \\\hline \text { Inventory } & 470 \\\hline \text { Property, plant, and equipment, net } & \underline { 1,750 } \\\hline \text { Total assets } & \underline { 2,500 } \\\hline & \\\hline & \\\hline \text { Accounts payable } & 360 \\\hline \text { Loan payable } & 650 \\\hline \text { Common shares } & 800 \\\hline \text { Retained earnings } & \underline { 690 } \\\hline \text { Total liabilities and shareholders' equity } & \underline { 2,500 } \\\hline\end{array}$$ 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.

---

Definitions:

Dancing Abilities

The skill or talent in moving rhythmically to music, often following a set sequence of steps or moves.

Ethnic Identity

The aspect of individuals' identity concerning their ancestry or cultural heritage, often marked by language, religion, and customs.

National Household Survey

A comprehensive survey conducted to gather detailed information about the demographic, social, and economic condition of the country's population.

Dr. Samuel George Morton

A 19th-century physician and scientist known for his controversial and debunked work in craniometry, which he used to try to provide evidence for racial differences and superiority.