During the Current Year, Compton Crate Corporation Purchased All of the Outstanding

question 31

Essay

During the current year, Compton Crate Corporation purchased all of the outstanding common stock of Little Lacy Ltd. (LLL), paying $60 million in cash. Compton recorded the assets acquired as follows:
The book value of LLL's assets and owners' equity before the acquisition were $50 million and $30 million, respectively.
Required: Compute the fair value of LLL's liabilities that Compton assumed in the acquisition.
$$\begin{array} { l l } \text { Accounts receivable } & \$ 5,500,000 \\\text { Inventory } & 18,000,000 \\\text { Property, plant, and equipment } & 45,500,000 \\\text { Goodwill } & 22,000,000\end{array}$$

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Definitions:

Stable Company

Refers to a firm with consistent performance, low volatility in its stock price, and predictable financial returns, making it a less risky investment.

Growing Rapidly

A phase characterized by a significant increase in a company's revenue, profits, or size within a short period.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations based on its operating income.

Return on Stockholders' Equity

A measure of the profitability of a corporation in relation to the equity held by its shareholders, calculated as net income divided by shareholder equity.