Question
Lucky's acquires Waterview, Inc., by issuing 40,000 shares of $1 par common stock with a market price of $25 per share on the acquisition date
Lucky's acquires Waterview, Inc., by issuing 40,000 shares of $1 par common stock with a market price of $25 per share on the acquisition date and paying $125,000 cash. The assets and liabilities on Waterview's balance sheet were valued at fair values except equipment that was undervalued by $300,000. There was also an unrecorded patent valued at $40,000, as well as an unrecorded trademark valued at $75,000. In addition, the agreement provided for additional consideration, valued at $60,000, if certain earnings targets were met.
Thepre-acquisitionbalance sheets for the two companies at acquisition date are presented below.
Lucky's
Waterview
Cash$300,000
$260,000
Accounts receivable250,000
135,000
Inventory254,000
275,000
Property, plant, and equipment2,300,000
356,500
$3,104,000
$1,026,500
Accounts payable$45,000
$37,500
Salaries and taxes payable450,000
46,000
Notes payable500,000
450,000
Common stock250,000
60,000
Additional paid-in capital950,000
106,500
Retained earnings909,000
326,500
$3,104,000
$1,026,500
Compute consolidated inventory.
Select one:
A.$604,000
B.$254,000
C.$ 21,000
D.$529,000
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