Pawan Corporation acquires all of Sesa Company at an acquisition cost of $80,000,000 in cash....
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Accounting
Pawan Corporation acquires all of Sesa Company at an acquisition cost of $80,000,000 in cash. Sesa's reported assets and liabilities are as follows:
|
| Book Value Dr (Cr) | Fair Value Dr (Cr) |
| Current assets | $ 5,000,000 | $ 7,000,000 |
| Land, buildings, and equipment (net) | 60,000,000 | 40,000,000 |
| Liabilities | (40,000,000) | (39,000,000) |
Pawan determines that Sesa has the following identifiable intangible assets, not reported on its balance sheet:
|
| Fair Value |
| Favorable leaseholds | $ 4,000,000 |
| In-process research & development | 3,000,000 |
| Advertising contracts | 5,000,000 |
Pawan also discovers that Sesa has not properly recorded the expected liability from a settled lawsuit, currently estimated at $6,000,000. Pawan records goodwill of:
| A. | $54,000,000 | |
| B. | $60,000,000 | |
| C. | $69,000,000 | |
| D. | $66,000,000 |
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