Figure: Presented Below Are the Financial Balances for the Atwood Company

question 14

Multiple Choice

Figure:
Presented below are the financial balances for the Atwood Company and the Franz Company as of December 31, 2010, immediately before Atwood acquired Franz. Also included are the fair values for Franz Company's net assets at that date. Note: Parenthesis indicate a credit balance
Assume a business combination took place at December 31, 2010. 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 to effect this acquisition transaction. To settle a difference of opinion regarding Franz's fair value, Atwood promises to pay an additional $5.2 (in thousands) to the former owners if Franz'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) at date of acquisition.

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

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Definitions:

Activity Cost Pool

A collection of costs assigned to specific activities based on their use of resources in a process costing system.

Factory Overhead Rate Method

This method allocates indirect manufacturing costs based on a predetermined rate to products or job orders.

Allocation Base

A measure or quantity, such as labor hours or machine hours, used to assign costs to activities or objects.

Machine Hours

A measure of the total time machines are operational within a specific period, often used in activity-based costing or allocation.