[payaza2000]

Damon Co. purchased 100% of the outstanding common stock of Smith Co. in an acquisition by issuing 20,000 shares of its $1 par common stock that had a fair value of $10 per share and providing contingent consideration that had a fair value of $10,000 on the acquisition date. Damon also incurred $15,000 in direct acquisition costs. On the acquisition date, Smith had assets with a book value of $200,000, a fair value of $350,000, and related liabilities with a book and fair value of $70,000. What amount of gain should Damon report related to this transaction?

From NINJA CPA MCQ

My initial thought was that the answer should of been $80,000

FV Net Assets: $280,000 ($350,000-$70,000)

Less: 200,000 Shares * 10 FV: $200,000

= $80,000 Gain on purchase.

However the answer took into consideration “providing contingent consideration that had a fair value of $10,000.”- My question is I don’t conceptually understand what this is? Could someone also please explain?

Also I am not sure how I am doing in comparison to others, but at the moment i’m only trending 72% on the FAR multiple choice for NINJA CPA MCQ. I am using this in conjunction with Becker.

Finally any tips on how to study for the simulations. Just do them over and over again?

FAR 5/6/2015- 84
REG 8/3/2015 - 87
AUD 10/25/2015- 69 1/20/2016 -75
BEC 2/26/2016- 80

Thank you God