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Company A (accounting acquiree) |
Company B (accounting acquirer) |
||
---|---|---|---|
Shareholders’ equity
|
|||
Retained earnings
|
$800
|
$1,400
|
|
Issued equity
|
|||
100 common shares
|
300
|
||
60 common shares
|
600
|
||
Total shareholders’ equity
|
$1,100
|
$2,000
|
Combined company |
|
---|---|
Shareholders’ equity
|
|
Retained earnings 1
|
$1,400
|
Issued equity
|
|
250 common shares 2
|
2,200
|
Total shareholders’ equity
|
$3,600
|
Shares at par ($2) |
APIC |
Retained earnings |
Total shareholders’ equity |
|
---|---|---|---|---|
1/1/X1
|
120
|
600
|
300
|
1,020
|
Shares issued 7/1/X1
|
40
|
110
|
150
|
|
Net income
|
250
|
250
|
||
12/31/X1
|
160
|
710
|
550
|
1,420
|
Shares issued 2/1/X2
|
40
|
190
|
230
|
|
Net income
|
200
|
200
|
||
3/31/X2
|
200
|
900
|
750
|
1,850
|
Shares at par ($1) 1 |
APIC |
Retained earnings |
Total shareholders’ equity |
|
---|---|---|---|---|
1/1/X11
|
240
|
480
|
300
|
1,020
|
Shares issued 7/1/X11
|
80
|
70
|
150
|
|
Net income1
|
250
|
250
|
||
12/31/X1 1
|
320
|
550
|
550
|
1,420
|
Shares issued 2/1/X2 1
|
80
|
150
|
230
|
|
Net income1
|
200
|
200
|
||
3/31/X21
|
400
|
700
|
750
|
1,850
|
Recapitalization 4/1/X22
|
100 2
|
25 2
|
125
|
|
Net income
|
300
|
300
|
||
12/31/X2
|
500
|
725
|
1,050
|
2,275
|
Earnings for the year ended December 31, 20X1
|
$800
|
Number of common shares outstanding of Company B
|
60
|
Exchange ratio
|
2.5
|
Number of shares outstanding from January 1, 20X1 through September 30, 20X1
|
150
|
Number of shares outstanding from acquisition date through December 31, 20X1
|
250
|
Weighted-average number of shares outstanding (150 shares × 9 / 12) + (250 shares × 3 / 12)
|
175
|
Earnings per share for year ended December 31, 20X1 ($800 / 175 shares)
|
$4.57
|
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