Question

Bullen Inc. acquired 100% of the voting common stock ofVicker Inc. on January 1, 2018. The book value and fair value ofVicker's accounts on that date (prior to creating the combination) are as follows, along with the book value of Bullen1s accounts:

	Bullen Book Value	Vicker Book Value	Vicker Fair Value
Retained earnings, 1/1/2018	$250,000	$240,000
Cash and receivables	170,000	70,000	$70,000
Inventory	230,000	170,000	210,000
Land	280,000	220,000	240,000
Buildings (net)	480,000	240,000	270,000

Equipment (net)	120,000	90,000	90,000
Liabilities	650,000	430,000	420,000
Common stock	360,000	80,000
Additional paid-in capital	20,000	40,000

1O. Assume that Bullen issued 12,000 shares of common stock, with a $5 par value and a $47 fair value, to obtain all of Vicker's outstanding stock. In this acquisition transaction, how much goodwill should be recognized?

A) $144,000.

B) $104,000.

C) $ 64,000.

D) 60,000.

E) 0.

11. What is the consolidated balance for Land as a result of this acquisition transaction? A) $460,000.

460,000

$510,000.

$500,000.

520,000

490,000

12. What will be the consolidated Additional Paid-In Capital and Retained Earnings as a result of this acquisition transaction?

*

$60,000 and $490,000.

$60,000 and $250,000.

$380,000 and $250,000.

$524,000 and $250,000.

$524,000 and $420,000.

Answer 1

1. B) $104,000.

		$
	Consideration Value	564,000
	(12000 shares @47)
	Cash	70,000
+	Inventory	210,000
+	Land	240,000
+	Building	270,000
+	Equipment	90,000
-	Liabilities	420,000
=	Net Assets Value	460,000
	Goodwill = Consideration - Net Assets
	= 564000 - 460000
	104000

2. $520,000

Bullen Inc 280000 + Fair Value of Vicker inc 240000 = $ 520,000

3.

Additional paid in Capital

20000 + (12000 * 42)

= 20000 + 504000

= $ 524,000

Retained Earnings $ 250,000

(Only parent company's retained earnings are considered. Subsidary's net assets are taken over)

Below option is correct

$524,000 and $250,000.