Reference no: EM132521564
Question - Pear Company acquired all of Strawberry, Inc.'s outstanding shares on January 1. Pear paid $300,000 and issued $200,000 in long-term liabilities and paid $35,000 in legal fees.
Pear also agreed to pay $75,000 to the former owners of Strawberry contingent on meeting certain revenue goals during the following year. Pear estimated the present value of its probability adjusted expected payment for the contingency or contingent obligation at $23,000.
Pre combination book values for Strawberry are as follows:
Current assets $85,000
Equipment 90,000
Buildings 175,000
Goodwill 30,000
Total $380,000
Current liabilities $(50,000)
Common stock (180,000)
Retained earnings (115,000)
Revenues (135,000)
Expenses 100,000
Total $ 380,000
Pear's appraisal of Strawberry found two balance sheet accounts that differed from fair value. Equipment was undervalued by $15,000 and Buildings by $5,000. Pear noted that Strawberry has unrecorded client contracts worth $60,000 and research and development activity in process with an appraised fair value of $90,000. The total consideration is 523000.
Required - What values for each of the acquired assets and liabilities will be used in the consolidation?