Multiple Choice Price Company issued 8,000 shares of its $20 par value common stock for the net assets of Sims Company in a business combination under which Sims Company would be merged into Price Company. On the date of the combination, Price Company common stock had a fair value of $30 per share. Balance sheets for Price Company and Sims Company immediately prior to the combination were: LO4 Current Assets Plant and Equipment (net)
Total Assets Liabilities Common Stock, $20 par value Other Contributed Capital Retained Earnings Total Equities Required:
Select the letter of the best answer.
Sims $ 64,000 136,000 $200,000 $ 50,000 80,000 20,000 50,000 $200,000 1. If the business combination is treated as a purchase and Sims Company’s net assets have a fair value of $228,800, Price Company’s balance sheet immediately after the combination will include goodwill of

(a) $10,200.

(b) $12,800.

(c) $11,200.

(d) $18,800.
2. If the business combination is treated as a purchase and the fair value of Sims Company’s current assets is $90,000, its plant and equipment is $242,000, and its liabilities are $56,000, Price Company’s balance sheet immediately after the combination will include

(a) Negative goodwill of $36,000.

(b) Plant and equipment of $817,000.

(c) Plant and equipment of $781,000.

(d) Goodwill of $36,000.