Reference no: EM131873869

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.