Ferodo Industries Acquires the Assets and Liabilities of Grundig Inc

Ferodo Industries acquires the assets and liabilities of Grundig Inc. for $85,000,000 cash. At that date, Grundig's balance sheet is as follows:


$$\begin{array}{l}\text { At the acquisition date, Grundig's assets and liabilities have the following fair values: }\\\begin{array} { | l | r | } \hline & { \text { Fair value } } \\\hline \text { Cash, receivables } & \$ 600,000 \\\hline \text { Merchandise inventory } & 2,500,000 \\\hline \text { Land, buildings, and equipment } & 100,000,000 \\\hline \text { Current liabilities } & 6,000,000 \\\hline \text { Long-term bonds payable } & 300,000,000 \\\hline\end{array}\end{array}$$ Grundig has $5,000,000 in unreported technology.
Required a. Prepare the journal entry made by Ferodo to record its acquisition of Grundig.
b. Grundig's book value is -$2,400,000. Explain why Ferodo paid $85,000,000, or $87,400,000 more than book value for Grundig.