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