Question

On July 1, 2009, Lazer, Inc. acquired all of the assets, with a fair value of $400,000, and liabilities, with a fair value of $150,000, of Tipco, Inc. for $250,000 cash. In addition, Lazer paid $20,000 in legal and accounting fees for the combination and expects to pay $50,000 to close one of Tipco's plants and relocate its employees. Which one of the following is the total amount of consideration that Lazer paid for Tipco in the business combination?

A. $250,000
B. $270,000
C. $300,000
D. $320,000

Answer 1

The total consideration Lazer paid for Tipco includes the acquisition price and direct costs related to the acquisition, totaling $320,000.

Step-by-step explanation:

The total amount of consideration that Lazer paid for Tipco in the business combination should include the purchase price as well as all the direct costs related to the acquisition. In this scenario, Lazer, Inc. acquired the assets and liabilities of Tipco, Inc. for a cash payment of $250,000. Additionally, Lazer incurred legal and accounting fees amounting to $20,000 and anticipates to spend $50,000 on closing one of Tipco's plants and relocating its employees. The total consideration thus would be the sum of these amounts: the initial purchase price plus the direct costs related to the acquisition.

Calculation:

• Purchase price: $250,000
• Legal and accounting fees: $20,000
• Plant closure and employee relocation costs: $50,000

Therefore, the total consideration equals $250,000 + $20,000 + $50,000 =

$320,000

.