Question: safedata corporation has the following account balances and respective fair...
SafeData Corporation has the following account balances and respective fair values on June 30:
|Book Values||Fair Values|
|In-process research and development||0||318,000|
|Additional paid-in capital||(300,000||)|
|Retained earnings deficit, 1/1||674,300|
Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of common stock having a $1 par value but a $55 fair value. Privacy First incurred $10,000 in stock issuance costs and paid $55,000 to an investment banking firm for its assistance in arranging the combination. In negotiating the final terms of the deal, Privacy First also agrees to pay $80,000 to SafeData’s former owners if it achieves certain revenue goals in the next two years. Privacy First estimates the probability adjusted present value of this contingent performance obligation at $24,000.
- What is the fair value of the consideration transferred in this combination?
- How should the stock issuance costs appear in Privacy First’s postcombination financial statements?
- How should Privacy First account for the fee paid to the investment bank?
- How does the issuance of these shares affect the stockholders’ equity accounts of Privacy First, the parent?
- How is the fair value of the consideration transferred in the combination allocated among the assets acquired and the liabilities assumed?
- If Privacy First’s stock had been worth only $30 per share rather than $55, how would the consolidation of SafeData’s assets and liabilities have been affected?