FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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The financial balances for the Atwood Company and the Franz Company as of December 31, 2020, are presented below. Also included are the fair market values for Franz Company's net assets.
Cash
Balance Sheet
Receivables
Inventory
Land
Buildings (net)
Equipment (net)
Accounts Payable
Accrued Expenses
Long-term Liabilities
Common Stock ($20 par)
Common Stock ($ 5 par)
Additional paid-in capital
Retianed earnings
Atwood
(in thousands)
Book Value
December 31,2020
$870
660
1,230
1,800
1,800
660
(570)
(270)
(2,700)
(1980)
(210)
(1,170)
(2 880)
2,760
Book Value
December 31,2020
$240
600
420
260
540
380
(240)
(60)
(1,020)
(420)
(180)
(480)
Franz Co.
(in thousands)
December 31,2020
$240
600
580
250
650
400
(240)
(60)
FMV
(1,120)
FMV Excess
December
31,2020
SO
0
160
(10)
110
20
0
0
(100)
Revenues
(660)
Expenses
620
Note: Parenthesis indicate a credit balance. In the following situations, determine the value that would be shown in the consolidated financial statements for Atwood Company at date of acquisition.
Assume a purchase took place at December 31, 2020. Atwood issued 50 shares of its common stock with a fair market value of $35 for all of the outstanding common shares of Franz. Stock issuance costs of $15 and direct
costs of $10 were paid. Atwood is applying the acquisition method in accounting for Franz. To settle a difference of opinion regarding Franz's fair value, Atwood promises to pay an additional $41,600 to the former owners if
Franz's earnings exceed a certain sum during the next year. Given the probability of the required contingency payment and utilizing a 4% discount rate, the expected present value of the contingency is $5.
What is the consolidated expenses at date of acquisition?
$2,760.
O $3,380.
O $2,700.
O $2,735.
O $2,770.
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Transcribed Image Text:The financial balances for the Atwood Company and the Franz Company as of December 31, 2020, are presented below. Also included are the fair market values for Franz Company's net assets. Cash Balance Sheet Receivables Inventory Land Buildings (net) Equipment (net) Accounts Payable Accrued Expenses Long-term Liabilities Common Stock ($20 par) Common Stock ($ 5 par) Additional paid-in capital Retianed earnings Atwood (in thousands) Book Value December 31,2020 $870 660 1,230 1,800 1,800 660 (570) (270) (2,700) (1980) (210) (1,170) (2 880) 2,760 Book Value December 31,2020 $240 600 420 260 540 380 (240) (60) (1,020) (420) (180) (480) Franz Co. (in thousands) December 31,2020 $240 600 580 250 650 400 (240) (60) FMV (1,120) FMV Excess December 31,2020 SO 0 160 (10) 110 20 0 0 (100) Revenues (660) Expenses 620 Note: Parenthesis indicate a credit balance. In the following situations, determine the value that would be shown in the consolidated financial statements for Atwood Company at date of acquisition. Assume a purchase took place at December 31, 2020. Atwood issued 50 shares of its common stock with a fair market value of $35 for all of the outstanding common shares of Franz. Stock issuance costs of $15 and direct costs of $10 were paid. Atwood is applying the acquisition method in accounting for Franz. To settle a difference of opinion regarding Franz's fair value, Atwood promises to pay an additional $41,600 to the former owners if Franz's earnings exceed a certain sum during the next year. Given the probability of the required contingency payment and utilizing a 4% discount rate, the expected present value of the contingency is $5. What is the consolidated expenses at date of acquisition? $2,760. O $3,380. O $2,700. O $2,735. O $2,770.
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