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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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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: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
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
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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