Reference no: EM132485936
Huey Company acquires 100% of the stock of Solar Corporation on January 1, 2019, for $2,400,000 cash. As of that date Solar had the following account balances:
Book Value Fair Value
Cash $300,000 $300,000
Accounts receivable $325,000 $325,000
Inventory $350,000 $350,000
Building-net (10 year life) 1,000,000 900,000
Equipment-net (5 year life) 300,000 400,000
Land 600,000 900,000
Accounts Payable 125,000 125,000
Bonds Payable (Face amount $1,000,000; due 12/31/2023)
2,000,000 2,050,000
Common stock 700,000
Additional paid-in capital 250,000
Retained earnings 880,000
- In 2019 and 2020, Solar had net income of $250,000 and $240,000, respectively. In addition, Solar paid dividends of $16,000 in both years. Inventory is assumed to be sold in 2019. Assume straight line amortization/ depreciation for assets and bonds payable.
Question 1: What is the amount of goodwill at date of acquisition?
a. $320,000
b. $270,000
c. $220,000
d. $ 30,000
Question 2: What amount of inventory would be added to the parent's inventory balance to get consolidated inventory at date of acquisition?
a. $-0-
b. $350,000
c. $400,000