How much should Beasley record as total assets acquired in the Donovan merger? a. $400,000 b. $420,000

Question:

How much should Beasley record as total assets acquired in the Donovan merger?

a. $400,000

b. $420,000

c. $410,000

d. $480,000

On May 1, Donovan Company reported the following account balances:

Current assets . . . . . . . . . . . . . . . . . . . . . $ 90,000

Buildings & equipment (net) . . . . . . . . . . 220,000

Total assets . . . . . . . . . . . . . . . . . . . . . . . $310,000

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000

Common stock . . . . . . . . . . . . . . . . . . . . 150,000

Retained earnings . . . . . . . . . . . . . . . . . . 100,000

Total liabilities and equities . . . . . . . . . . $310,000

On May 1, Beasley paid $400,000 in stock (fair value) for all of the assets and liabilities of Donovan, which will cease to exist as a separate entity. In connection with the merger, Beasley incurred $15,000 in accounts payable for legal and accounting fees.

Beasley also agreed to pay $75,000 to the former owners of Donovan contingent on meeting certain revenue goals during the following year. Beasley estimated the present value of its probability adjusted expected payment for the contingency at $20,000. In determining its offer, Beasley noted the following:

• Donovan holds a building with a fair value $30,000 more than its book value.

• Donovan has developed unpatented technology appraised at $25,000, although is it not recorded in its financial records.

• Donovan has a research and development activity in process with an appraised fair value of $45,000. The project has not yet reached technological feasibility.

• Book values for Donovan's current assets and liabilities approximate fair values.

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Advanced Accounting

ISBN: 9781260247824

14th Edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik

Question Posted: