Reference no: EM131772239
Question -
Q1. On February 5, Pryor Corporation paid $1,600,000 for all the issued and outstanding common stock of Shaw, Inc., in a transaction properly accounted for as an acquisition. The book values and fair values of Shaw's assets and liabilities on February 5 were as follows
Book Value Fair Value
Cash $160,000 $160,000
Receivables (net) 180,000 180,000
Inventory 315,000 300,000
Plant and equipment (net) 820,000 920,000
Liabilities (350,000) (350,000)
Net assets $1,125,000 $1,210,000
What is the amount of goodwill resulting from the business combination?
a. $-0-.
b. $475,000.
c. $85,000.
d. $390,000.
Q2. P Company purchased the net assets of S Company for $225,000. On the date of P's purchase, S Company had no investments in marketable securities and $30,000 (book and fair value) of liabilities. The fair values of S Company's assets, when acquired, were
Current assets - $ 120,000
Noncurrent assets - 180,000
Total - $300,000
How should the $45,000 difference between the fair value of the net assets acquired ($270,000) and the consideration paid ($225,000) be accounted for by P Company?
a. The noncurrent assets should be recorded at $ 135,000.
b. The $45,000 difference should be credited to retained earnings.
c. The current assets should be recorded at $102,000, and the noncurrent assets should be recorded at $153,000.
d. An ordinary gain of $45,000 should be recorded
Q3. P Company acquires all of the voting stock of S Company for $930,000 cash. The book values of S Company's assets are $800,000, but the fair values are $840,000 because land has a fair value above its book value. Goodwill from the combination is computed as:
a. $130,000.
b. $90,000.
c. $40,000.
d. $0.