Reference no: EM133050783
Question - On May 1st. Donovan Company reported the following account balances:
Current Assets: $90,000
Buildings and Equipment: $220,000
Total assets: $310,000
Liabilities: $60,000
Common Stock: $150,000
Retained Earnings: $100,000
Total liabilities and equity: $310,000
On May 1st, Beasley paid $400,000 in stock (fair value) for all the assets and liabilities of Donovan, which will cease to exist as a separate entity. In connection with the merger, Beasley incurred $15,000 in AP for legal and accounting fees.
Beasley also agreed to pay $75,000 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 of the contingency at $20,000. In determining the offer, Beasley noted the following:
Donovan owns a building with a fair value $30,000 higher than its book value.
Donovan has developed unpatented technology appraised at $25,000, although t is not recorded in the financial records.
Donovan has in process R&D appraised at $45,000 that has not reach technological feasibility.
Book values for Donovan's current assets and liabilities approximate fair value.
Required -
What should Beasley record as total liabilities incurred or assumed in connection with the merger?
What should Beasley record as total assets acquired in the merger?
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