Reference no: EM132616225

On 1 February 20X2, FoodCo acquired DrugCo, pharmaceutical company. At the acquisition date, DrugCo reported the following assets in its statement of financial position:

• Capitalized cost for development and patent of the new drug: CU 10 million, including the amount of CU 3 mil. for medical research. Based on preliminary evaluation of the commercial success, DrugCo believes that the fair value of a patent is CU 12 mil.

• Capitalized cost of medical research performed for the client based on the contract: CU 1 million; Capitalized cost of training the staff: CU 500 000. DrugCo believes that the training will result in better and faster drug development and significant cost savings within the next 2 years and therefore, capitalized cost of training will be amortized over the next 2 years.

• DrugCo has ran an advertising campaign from 1 December 20X1 till 1 June 20X2. The total cost of the campaign is CU 2.4 million, all paid in December 20X1. DrugCo believes that the campaign will result in a better publicity and increased sales in the next 2 years and therefore, DrugCo capitalized the cost of campaign and plans to amortize it over the next 2 years. The accumulated amortization is CU 200 000 at the acquisition date.

• On 1 February 20X1, DrugCo received an exclusive government license for 3 years to produce a special type of a drug. The license is not recognized in DrugCo's financial statements, but independent valuator determined the fair value to CU 3 mil.

• The fair value of DrugCo's other net assets was CU 20 mil. Calculate the net assets of DrugCo at the acquisition date.

Problem 1: Calculate the net assets of DrugCo at the acquisition date.