purchase price
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

Transcribed Image Text:Determine the purchase price at
which P Co. would record a $20,000
gain. *
$685,000
$690,000
$670,000
$665,000
None of the options is correct

Transcribed Image Text:P Company wishes to acquire S Co.
for cash in an asset acquisition, and
appraisals reveal that the inventory
has a fair value $185,000, and the
equipment has a current value of
$645,000. The book value and fair
value of liabilities are the same. The
following balance sheets were
reported on January 1, 2011, for P
Company and S Company:
P Co.
$ 150,000
Sco.
$ 30,000
Cash
Inventory
Equipment (net)
450,000
150,000
570,000
$750,000
1,320,000
Total
$1,920,000
$ 450,000
$150,000
Total liabilities
Common stock, $20 par value
Other contributed capital
Retained earnings
600,000
300,000
375,000
105,000
495,000
195,000
$1,920,000
$750,000
Total
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