Q1. Analyze advantages and disadvantages of business combination either by acquiring Assets vs. Stock and by what are the Major Decision Factors to choose between Acquiring of Assets vs. Stock?(1.0 mark)
Answer:
Q2 ABC Corporation (parent) acquired 100% of the outstanding common stock of Oraby Inc. (subsidiary ) for SR 3,000,000 cash and 50,000 shares of its own common stock (SR 1 par value), which was trading SR 30 per share in Saudi stock exchange at the acquisition date in January 1,2021 ?(1.0 mark)
Required: Prepare the journal entry to record the acquisition on the books of parent
Answer:

Q3. ABC Corporation (parent) acquired 100% of the outstanding common stock of Oraby Inc. (subsidiary) and ABC assumed and paid in cash the following direct costs of acquisition: ?(1.0 mark)
Expense name Amounts in SR
Legal fees 5,000
Accounting fees 10,000
Travel expenses 2,000
Legal fees (stock issue) 15,000
Accounting fees (stock issue) 3,000
SEC filing fees 15,000
Total 50,000

Required: Prepare the journal entry to record the direct costs.
Answer:

Q4. ABC Corp. paid SR 3,500,000,000 in cash for Oraby Inc. and that the estimated fair market values of Subsidiary’ assets, liabilities, and equity accounts are as follows as of December 31 ,2020 . ? (1.0 mark)
Title Fair value in SR
Accounts Receivable 1000,000
Inventory 500,000
PP&E net of accumulated depreciation ) 1500,000
Liabilities 500,000
Common Stock 300,000
Retained Earnings 200,000
Additional Paid-in Capital 2,000,000
Required: calculate the goodwill
Answer:

5. ABC Corporation created Oraby Corporation with a transfer of SR 600 cash equals the book value of SR 500 common stock and SR 100 retained earnings, During Oraby Corporation’s first year of operations; it generated net income of SR 100 and paid dividends of SR 40. (1.0 mark)
   Required:
6. What is the balance in the Investment in Sub account on Parent’s books at the end of year using the equity method?
7. Pass the basic elimination entry
   Answer: