In May 2019, FireEye, Inc. acquired all of the outstanding shares of privately held Verodin, for $215,523,000 in cash and 12,606,914 shares of FireEye common stock with a fair value of $179,550,000 and a par value of $0.0001 /share. In addition, FireEye converted Verodins unvested stock options to FireEye stock, and included $2,250,000 as part of acquisition consideration. Out-of-pocket acquisition-related costs were $900,000. The following table summarizes the date-of-acquisition fair values of the identifiable net assets acquired. Net tangible assets $22,554,000 Identifiable intangible assets: Developed technology 57,450,000 Customer relationships 6,900,000 Trade names 2,400,000 Contract backlog 1,050,000 Deferred tax liability 1,329,000 Fair value of identifiable net assets $89,025,000 Required a. Assume the fair value of total stock options that FireEye assumed was $6,000,000 million. However, only $2,250,000 million was included as part of acquisition cost. Indicate true or false for each of the following statements relating to the criteria for determining the fair value of assumed stock options included as acquisition cost and the proper accounting for the remaining stock option fair value: Answer true 1. The $2,250,000 fair value of stock options included as part of acquisition cost represents compensation for services performed prior to the acquisition date. Answer false 2. The $3,750,000 fair value of stock options not included as part of the acquisition cost relates to services performed prior to the acquisition date and is expensed immediately. Answer true 3. The $3,750,000 fair value of stock options not included as part of the acquisition cost is recorded as prepaid compensation, to be expensed over the future service period to which they apply. Answer false 4. The $2,250,000 fair value of stock options included as part of acquisition cost is compensation for future services and is expensed in the future as services are performed. b. What is the total acquisition cost, and how much goodwill was recognized for this acquisition? Total Acquisition Cost: $Answer 215,523,000 Goodwill: $Answer 0 c. Prepare the journal entry to record this transaction as a merger. Assume out-of-pocket acquisition related costs were paid in cash, and that total stock option value was $6,000,000 million. Note: Round all numbers to the nearest thousand. For example, $905 would be $1,000. Debit Credit Net tangible assets 0 0 Answer Developed technology 0 0 Answer Customer relationships 0 0 Answer Trade name 0 0 Answer Contract backlog 0 0 Answer Deferred tax liability 0 0 Answer Gain on Acquisition 0 0 Answer Goodwill 0 0 Answer Paid-in capital 0 0 Answer Prepaid compensation expense 0 0 Answer Cash 0 0 Answer Retained Earnings 0 0 Answer To record the merger d. Assume that you are FireEyes auditor. Indicate true/false for each of the following statements regarding potential concerns related to how this acquisition was reported: Answer true 1. FireEye allocating such a large percentage ( 78%) of the acquisition cost to goodwill, which is not amortized, might indicate an understatement of amortizable intangible assets. Therefore, the auditor should evaluate whether all amortizable intangible assets have been recorded. Answer false 2. FireEye allocating such a large percentage ( 78%) of acquisition cost to goodwill, which is not amortized, might indicate an overstatement of the fair value of tangible assets acquired. Therefore, the auditor should evaluate whether tangible assets have been overstated.