On May 1, Donovan Company reported the following account balances: Current assets $ 92,500 Buildings & equipment (net) 240,000 Total assets $ 332,500 Liabilities $ 64,500 Common stock 150,000 Retained earnings 118,000 Total liabilities and equities $ 332,500 On May 1, Beasley paid $425,700 in stock (fair value) for all of the assets and liabilities of Donovan, which will cease to exist as a separate entity. In connection with the merger, Beasley incurred $24,200 in accounts payable for legal and accounting fees. Beasley also agreed to pay $87,300 to the former owners of Donovan contingent on meeting certain revenue goals during the following year. Beasley estimated the present value of its probability adjusted expected payment for the contingency at $29,900. In determining its offer, Beasley noted the following: Donovan holds a building with a fair value $30,300 more than its book value. Donovan has developed unpatented technology appraised at $29,000, although is it not recorded in its financial records. Donovan has a research and development activity in process with an appraised fair value of $53,300. The project has not yet reached technological feasibility. Book values for Donovan’s current assets and liabilities approximate fair values. 12. What should Beasley record as total liabilities incurred or assumed in connection with the Donovan merger?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter16: Retained Earnings And Earnings Per Share

Section: Chapter Questions

Problem 9P

See similar textbooks

Related questions

Question

On May 1, Donovan Company reported the following account balances:


Current assets	$	92,500
Buildings & equipment (net)		240,000
Total assets	$	332,500
Liabilities	$	64,500
Common stock		150,000
Retained earnings		118,000
Total liabilities and equities	$	332,500

On May 1, Beasley paid $425,700 in stock (fair value) for all of the assets and liabilities of Donovan, which will cease to exist as a separate entity. In connection with the merger, Beasley incurred $24,200 in accounts payable for legal and accounting fees.

Beasley also agreed to pay $87,300 to the former owners of Donovan contingent on meeting certain revenue goals during the following year. Beasley estimated the present value of its probability adjusted expected payment for the contingency at $29,900. In determining its offer, Beasley noted the following:

Donovan holds a building with a fair value $30,300 more than its book value.
Donovan has developed unpatented technology appraised at $29,000, although is it not recorded in its financial records.
Donovan has a research and development activity in process with an appraised fair value of $53,300. The project has not yet reached technological feasibility.
Book values for Donovan’s current assets and liabilities approximate fair values.

12. What should Beasley record as total liabilities incurred or assumed in connection with the Donovan merger?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions