Pawan Corporation acquires all of Sesa Company at an acquisition cost of Pawan Corporation acquires all of
Question:
Pawan Corporation acquires all of Sesa Company at an acquisition cost of $80,000,000 in cash. Sesa's reported assets and liabilities are as follows:
Book Value Dr (Cr) | Fair Value Dr (Cr) | |
Current assets | $ 5,000,000 | $ 7,000,000 |
Land, buildings, and equipment (net) | 60,000,000 | 40,000,000 |
Liabilities | (40,000,000) | (39,000,000) |
Pawan determines that Sesa has the following identifiable intangible assets, not reported on its balance sheet:
Fair Value | |
Favorable leaseholds | $ 4,000,000 |
In-process research & development | 3,000,000 |
Advertising contracts | 5,000,000 |
Pawan also discovers that Sesa has not properly recorded the expected liability from a settled lawsuit, currently estimated at $6,000,000.
Pawan records goodwill of:
A. | $54,000,000 | |
B. | $60,000,000 | |
C. | $69,000,000 | |
D. | $66,000,000 |
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th Edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson