Colton Jones Inc.
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Colton Jones, Inc.
Marion Jones was once the sole shareholder and president of Chempla, Inc.; in 20X1 she sold her stock to Westcoat Industries. She signed an agreement to be a consultant for five years. After being unable to make a profit Westcoat decided to sell their interest in Chempla, but were unable to find a buyer. Westcoat offered Chempla back to Marion Jones and an agreement was reached on September 1, 20X4.
Included in the agreement Marion would be majority shareholder of the newly formed corporation. A purchase price was set for the net assets and market values of accounts receivable, inventories, property, plant, and equipment, and accounts payable were obtained. Marion Jones with other investors was able to finance the acquisition of Chempla's net assets. Colton Jones, Inca doped LIFO basis of accounting.
Under the U.S. GAAP Codification of Accounting Standards, Codification Topic 805: Business Combinations; Colton Jones accounted for the acquisition of Chempla as they should have. The acquisition method was used as it should have been, one entity was identified as the acquirer, an acquisition date was stated, and the recognition and measurement principals are present. All parts of the acquisition that needed to take place were present in the case.1
1 GAAP Codification of Accounting Standards, Codification Topic 805: Business Combinations
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