Presented Below Are the Financial Balances for the Boxwood Company

question 41

Multiple Choice

Presented below are the financial balances for the Boxwood Company and the Tranz Company as of December 31, 2020, immediately before Boxwood acquired Tranz. Also included are the fair values for Tranz Company's net assets at that date (all amounts in thousands) . Note: Parenthesis indicate a credit balanceAssume a business combination took place at December 31, 2020. Boxwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Tranz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid to effect this acquisition transaction. To settle a difference of opinion regarding Tranz's fair value, Boxwood promises to pay an additional $5.2 (in thousands) to the former owners if Tranz's earnings exceed a certain sum during the next year. Given the probability of the required contingency payment and utilizing a 4% discount rate, the expected present value of the contingency is $5 (in thousands) .Compute consolidated buildings (net) immediately following the acquisition.

• A)$2,450.
• B)$2,340.
• C)$1,800.
• D)$650.
• E)$1,690.

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Definitions:

Pre-Tax Net Income

The income earned by a business before the deduction of tax expenses.

Variable Costs

Expenses that change in proportion to the activity of a business, such as the cost of raw materials.

Fixed Costs

Expenses that do not change in total regardless of the level of production or sales activity.

Absorption Costing

A product costing approach that incorporates all costs of manufacturing, including both fixed and variable, into the product's price.