Firm B Is Willing to Be Acquired by Firm a at a Price

question 148

Multiple Choice

Firm B is willing to be acquired by firm A at a price of $34 a share in either cash or stock. The incremental value of the proposed acquisition is estimated at $80,000. What is the true cost of the acquisition of firm B by firm A in an all-stock deal?

• A) $401,807
• B) $408,000
• C) $423,873
• D) $432,939
• E) $488,000

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Definitions:

Income Summary

An account to which all revenues and expenses are transferred at the end of an accounting period to compute the net income or loss for the period.

Withdrawals Account

An account in bookkeeping where amounts drawn out from the business by the owner for personal use are recorded.

Revenue Account

An account that tracks the income earned by a company from its operational activities, excluding expenses.

Fees Earned Account

An income account that records the revenue earned from services provided or fees charged.