[Answered] Contact Us for this Answer +1 323-412-5597 / support@academiagrades.com Accounting question”On January 1 2015 Dew Inc. (Dew) purchased 280000 of the 375000 outstanding common shares of Berry Co. (Berry) by issuing 10 years bonds. The bonds had a coupon rate of 6.5% and par value of $1900000. At the time the bonds were issued the market rate of interest was 5.5%. The share purchase agreement included a clause whereby if Berrys earnings reached certain specified levels in the two years subsequent to acquisition Dew would be required to make an additional cash payment of $68000 to Berrys old shareholders. At the date of acquisition the likelihood that earnings would reach the levels specified in the agreement was assessed at 60%. Dew uses the cost method to account for its investment in Berry. In the days following acquisition Berry’s shares were trading at $8 per share. On the date of acquisition the financial statements of Berry indicated that the book values of common stock and retained earnings were $2000000 and $550000 respectively. At this time appraisals indicated that the following balance sheet items had market values different from fair values:

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