What purchase price should Card Company record for the acquisition of Paper Company?

To determine the appropriate purchase price that Card Company should record for the acquisition of Paper Company, it is essential to consider the purchase price allocation principle. When acquiring another company, the purchase price is typically based on the fair value of the consideration transferred by the acquirer to obtain control over the acquiree.

In this case, if Card Company has negotiated a purchase price of $35 million, this amount reflects what they have agreed to pay to acquire Paper Company. This amount would represent the fair market value of the consideration based on negotiations and is standard practice in M&A transactions.

It's important to note that the final purchase price may involve various factors such as assets acquired, liabilities assumed, and the overall value of Paper Company. However, the question specifically focuses on the recorded purchase price. Given that $35 million is stated as the purchase price agreed upon by Card Company, this amount is considered the correct figure to record on their financial statements.

Other price options, such as $45 million, $25 million, or $55 million, could represent different scenarios or valuations but would not reflect the accurate purchase price agreed to in this transaction. Thus, the recorded purchase price must align with the negotiated value of the acquisition, which is $35 million in this case