Question

On June 30, 2019, ABC completed the acquisition of 100% of DEF Enterprises. Fair values of acquired asset equaled predecessor book value except for intangible assets which were worth $10,000,000 and had a 5 year life. The acquisition price was $50,000,000 paid in a note payable to the seller bearing interest at 6%

Assume income tax rate of 0%

DEF Enterprises prepared the following stand-alone quarterly income statements for the four quarters in the year ended 12/31/19. These EXCLUDE all impacts of acquisition accounting.

Q1 19 Q2 19 Q3 19 Q4 19

Revenues $13,000,000 $14,000,000 $13,000,000 $11,000,000

Costs of sales (8,000,000) (8,500,000) (7,000,000) (8,000,000)

Operating expenses (2,000,000) (2,000,000) (2,000,000) (2,500,000)

    Pretax income $ 3,000,000 $ 3,500,000 $ 4,000,000 $ 500,000

Consolidated net income of ABC for the year ended 12/31/19 was as follows:

Revenues $150,000,000

Costs of sales (100,000,000)

Operating expenses (38,500,000)

Interest expense (1,500,000)

     Pretax income $ 10,000,000

8. What is pro-forma revenue for Parent assuming the acquisition had happened at the beginning of the year

   1. $150,000,000

   2. $174,000,000

   3. $177,000,000

   4. $201,000,000

   5. None of the above

Answer 1

Answer would be : $177,000,000

Consolidated revenue of parent on 31.12.19: 150,000,000

Add: Sales of Q1 & Q2: 27,000,000

Total : 177,000,000

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