Allocating Purchase Price Including In-Process R&D Assume Adobe Systems, Inc., r

Question

Allocating Purchase Price Including In-Process R&D
Assume Adobe Systems, Inc., reports the following footnote to its 10-K report.

During fiscal 2006, we completed the acquisition of Macromedia, a provider of software technologies that enables the development of a wide range of Internet and mobile application solutions... The total $3.7 billion purchase price is allocated to the acquired net assets of Macromedia based on their estimated fair values as of December 3, 2005 and the associated estimated useful lives at that date:

(in $000) Amount Estimated Useful Life Net tangiable assets $ 833,164 N/A Identifiable intangible assets Acquired product rights 365,500 4 years Customer contracts and relationships 183,800 6 years Non-competition 500 2 years Trademarks 130,700 5 years Goodwill 1,993,898 N/A Stock-based compensation 150,951 2.18 years Total purchase price $ 3,658,513

Explanation / Answer

Given,

Net tangiable assets = $ 833,164

Total purchase price = $ 3,658,513

Therefore, the portion is allocated to net tangible assets = ($833,164/$ 3,658,513)*100

                                                                                 = 22.78%

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