The Financial Balances for the Atwood Company and the Franz

question 102

Multiple Choice

The financial balances for the Atwood Company and the Franz Company as of December 31, 2013, are presented below. Also included are the fair values for Franz Company's net assets. $\begin{array}{lrcr}&\text { Atwood } & \text { Franz Co } & \text { Franz Co. }\\&&\text { (all numbers are in thousands) }\\&\text { Book Value }&\text { Book Value }&\text { Fair Value }\\\text { Cash } & \$ 870 & \mathbf{\$ 2 4 0} & \mathbf{\$ 2 4 0} \\\text { Receivables } & 660 & 600 & 600 \\\text { Inventory } & 1,230 & 420 & 580 \\\text { Land } & 1,800 & 260 & 250 \\\text { Buildings (net) } & 1,800 & 540 & 650\\\text { Equipment (net) } & 660 & 380 & 400 \\\text { Accounts payable } & (570) & (240) & (240) \\\text { Accrued expenses } & (270) & (60) & (60) \\\text { Long-term liabilities } & (2,700) & (1,020) & (1,120) \\\text { Common stock }(\$ 20 \text { par) } & (1,980) & &\\\text { Common stock (\$5 par) } & & (420) \\\text { Additional paid-in capital } & (210) & (180) \\\text { Retained earnings } & (1,170) & (480) \\\text { Revenues } & (2,880) & (660) \\\text { Expenses } & 2,760 & 620\end{array}$ Note: Parenthesis indicate a credit balance Assume an acquisition business combination took place at December 31, 2013. Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid.
Compute consolidated goodwill at the date of the acquisition.

• A)$360.
• B)$450.
• C)$460.
• D)$440.
• E)$475.

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Definitions:

Market Price

The price at which an asset or service can be bought or sold in a given market.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health of the business.

Company

An organization created by several individuals for the purpose of running and managing a business, which can be either commercial or industrial in nature.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations by dividing current assets by current liabilities.