On December 31, 2020, Lemmon Company issued 20,000 shares of its common stock with a fair...
On December 31, 2020, Lemmon Company issued 20,000 shares of its common stock with a fair value of $50 per share for all of the outstanding common shares of May Company. Stock issuance costs of $4,000 and direct costs of $1,000 were paid. In addition, Lemmon promised to pay an additional $2,200 to the former owners if May's earnings exceeded a certain amount during the next year. The fair value of the potential obligation is estimated at $2,000.Compute the investment to be recorded at date of acquisition
Homework Answers
Investment to be recorded at date of acquisition:-
Fair Value of shares (20000*$50/share)
= $1,000,000
Add: Fair Value of potential obligation. = $2,000
Investment at date of acquisition $1,002,000
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