The Financial Balances for the Atwood Company and the Franz

question 80

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 fair value of the net assets acquired at the date of the acquisition.

• A)$1,300.
• B)$1,340.
• C)$1,500.
• D)$1,750.
• E)$2,480.

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Definitions:

Monopolization

The process or state where a single company or entity gains exclusive control over a particular market or industry, often regarded negatively due to its impact on competition.

Horizontal Price Fixing

An illegal practice where competitors agree to set their prices at a certain level, rather than competing fairly.

Shipping Fees

Charges applied for transporting goods from one location to another.

Hart-Scott-Rodino Act

U.S. legislation that requires large companies to file a report with the Federal Trade Commission and the Department of Justice before completing certain mergers, acquisitions, or transfers of securities.