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On July 1, 2009, Nexto, Inc. had the following summarized balance sheet with the book values and fair values shown: Accounts Receivable $40,000 $40,000 (net) Inventories 80,000 80,000 Plant and Equipment 160,000 200,000 (net) Land TOTAL ASSETS Accounts Payable Short-term Note Bonds Payable Book Value Fair Value TOTAL LIABILITIES 120,000 160,000 A) B) $400,000 $480,000 $ 20,000 $20,000 30,000 30,000 70,000 70,000 $120,000 $120,000 On that date Pesto, Inc. acquired 100% of Nexto's voting stock from its shareholders by paying the following consideration: a) Cash $200,000 b) Pesto, newly issued, 10,000 shares of stock, $10 par and $15 current market price Pesto paid $25,000 for legal and accounting fees to carry out the combination. What is the total amount of consideration that Pesto should recognize as its cost of acquiring Nexto? $300,000 $325,000 C) $350,000 D) $375,000 E) $360,000

On July 1, 2009, Nexto, Inc. had the following summarized balance sheet with the book values and fair values shown: Accounts Receivable $40,000 $40,000 (net) Inventories 80,000 80,000 Plant and Equipment 160,000 200,000 (net) Land TOTAL ASSETS Accounts Payable Short-term Note Bonds Payable Book Value Fair Value TOTAL LIABILITIES 120,000 160,000 A) B) $400,000 $480,000 $ 20,000 $20,000 30,000 30,000 70,000 70,000 $120,000 $120,000 On that date Pesto, Inc. acquired 100% of Nexto's voting stock from its shareholders by paying the following consideration: a) Cash $200,000 b) Pesto, newly issued, 10,000 shares of stock, $10 par and $15 current market price Pesto paid $25,000 for legal and accounting fees to carry out the combination. What is the total amount of consideration that Pesto should recognize as its cost of acquiring Nexto? $300,000 $325,000 C) $350,000 D) $375,000 E) $360,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On July 1, 2009, Nexto, Inc. had the following summarized balance sheet with the book values and fair values shown: Accounts Receivable $40,000 $40,000 (net) Inventories 80,000 80,000 Plant and Equipment 160,000 200,000 (net) Land TOTAL ASSETS Accounts Payable Short-term Note Bonds Payable Book Value Fair Value TOTAL LIABILITIES 120,000 160,000 A) B) $400,000 $480,000 $ 20,000 $20,000 30,000 30,000 70,000 70,000 $120,000 $120,000 On that date Pesto, Inc. acquired 100% of Nexto's voting stock from its shareholders by paying the following consideration: a) Cash $200,000 b) Pesto, newly issued, 10,000 shares of stock, $10 par and $15 current market price Pesto paid $25,000 for legal and accounting fees to carry out the combination. What is the total amount of consideration that Pesto should recognize as its cost of acquiring Nexto? $300,000 $325,000 C) $350,000 D) $375,000 E) $360,000
Transcribed Image Text:On July 1, 2009, Nexto, Inc. had the following summarized balance sheet with the book values and fair values shown: Accounts Receivable $40,000 $40,000 (net) Inventories 80,000 80,000 Plant and Equipment 160,000 200,000 (net) Land TOTAL ASSETS Accounts Payable Short-term Note Bonds Payable Book Value Fair Value TOTAL LIABILITIES 120,000 160,000 A) B) $400,000 $480,000 $ 20,000 $20,000 30,000 30,000 70,000 70,000 $120,000 $120,000 On that date Pesto, Inc. acquired 100% of Nexto's voting stock from its shareholders by paying the following consideration: a) Cash $200,000 b) Pesto, newly issued, 10,000 shares of stock, $10 par and $15 current market price Pesto paid $25,000 for legal and accounting fees to carry out the combination. What is the total amount of consideration that Pesto should recognize as its cost of acquiring Nexto? $300,000 $325,000 C) $350,000 D) $375,000 E) $360,000
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