Posted: September 16th, 2017
The Board of Directors of Art Innovations, Inc., has voted to acquire The Painter art gallery in Paris, France
The Board of Directors of Art Innovations, Inc., has voted to acquire The Painter art gallery (Gallery 1 from your Week 3 case) in Paris, France. The acquisition is made on January 1, 2013. Art Innovations issues 22,000 of its $1 par value stock with a market price of $10 per share on the date of acquisition to acquire a 100% interest in The Painter. The Painter will retain separate incorporation after the acquisition. In addition, Art Innovators paid $10,000 to a business broker for assistance in finding the acquisition and $2,000 in stock issuance costs.
The Balance Sheets on the date of acquisition are shown below, along with the Fair Market Values of the assets and liabilities of The Painter. Art Innovations is presented in U.S. dollars and The Painter in Euros.
Art Innovations, Inc.
Balance Sheet
January 1, 2013
| Assets | |
| Cash | 85,000 |
| Receivables | 45,000 |
| Inventory | 170,000 |
| Fixed Assets (net) | 192,000 |
| Total Assets | 492,000 |
| Liabilities and Equities | |
| Liabilities | 82,000 |
| Common Stock | 50,000 |
| Additional Paid-In-Capital | 45,000 |
| Retained Earnings (12/31/12) | 315,000 |
| Total Liabilities and Equity | 492,000 |
The Painter
Balance Sheet
January 1, 2013
| Assets | Book Value | Fair Market Value |
| Cash | 44,000 | 44,000 |
| Receivables | 46,000 | 46,000 |
| Inventory | 58,000 | 58,000 |
| Fixed Assets (net) | 139,000 | 182,000 |
| Total Assets | 287,000 | 330,000 |
| Liabilities and Equities | ||
| Liabilities | 176,000 | 176,000 |
| Common Stock | 60,000 | |
| Retained Earnings (12/31/12) | 51,000 | |
| Total Liabilities and Equity | 287,000 |
Relevant Exchange Rates for the Euro (in U.S. dollars) are as follows:
January 1, 2012 .60
December 31, 2012 .65
Weighted Average, 2012 .63
1. Translate The Painter’s Balance Sheet and FMV into U.S. Dollars (remember to look back at your Week 3 case to get translation numbers.
2. In General Journal form, record the acquisition entry for Art Innovators, Inc. using the acquisition method. Using that entry, update their January 1, 2013 Balance Sheet.
3. Prepare a consolidation worksheet and a balance sheet for the date of acquisition for Art Innovators, Inc.
4. Identify the possible reasons why Art Innovators, Inc. would acquire an existing gallery rather than starting their own in France.
5. Explain why Art Innovators, Inc. would pay more than the FMV of the net assets and liabilities to acquire The Painter.
Expert paper writers are just a few clicks away
Place an order in 3 easy steps. Takes less than 5 mins.