Powell Corporation paid $15 million in cash to acquire the assets and liabilities of Sloan...
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Accounting
Powell Corporation paid $15 million in cash to acquire the assets and liabilities of Sloan Company. Powell also agreed to make an additional cash payment in the future, with an expected present value of $600,000, if certain performance targets are met. Powell paid legal and consulting fees of $300,000 in cash in connection with the merger. A comparison of book and fair values of Sloans reported assets and liabilities follows:
(in thousands)
Book Value Fair Value
Current assets $ 600 $ 450
Property and equipment, net 5,000 2,000
Patents and trademarks 200 1,800
Current liabilities(400) (400)
Long-term debt (3,000) (3,200)
Net assets $2,400 $ 650
Sloan also has previously unreported developed technology, valued at $1.2 million, meeting ASC Topic 805 criteria for capitalization.
Required
a) What is the acquisition cost for this transaction?
b) Prepare the journal entry or entries made by Powell to record the business combination as a merger.
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