Reference no: EM132949058

Problem 1: BC and OP are both private not-for-profit entities. They combine to create LM, a new private not-for-profit entity with an entirely new board of directors. BC holds land with a book value of $300,000 and a fair value of $400,000. OP holds land with a book value of $500,000 and a fair value of $550,000. After LM has been formed, what is the reported value of the land account?

Multiple Choice

Option 1: $800,000
Option 2: $850,000
Option 3: $900,000
Option 4: $950,000

Problem 2: Southwest is a private not-for-profit entity. It acquires Northeast, another private not-for-profit entity. The acquisition value is $980,000. Northeast has two assets (and no liabilities): equipment with a net book value of $120,000 but a fair value of $150,000 and a building with a net book value of $500,000 but a fair value of $800,000. In the future, Northeast expects to receive some support through donations. Nonetheless, the entity is not expected to be predominantly supported by these donations and any investment income earned. After the combination, what amount should be reported for goodwill?

Multiple Choice

Option 1: $-0-
Option 2: $30,000
Option 3: $60,000
Option 4: $360,000