Pillow Company is purchasing an 80% interest in the common stock of Sleep Company.

Sleep’s balance sheet amounts at book and fair value are as follows:

Book Fair Account Value Value Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200,000 $ 250,000 Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,000 800,000 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (200,000) (200,000)

What adjustments to recorded values of Sleep Company’s accounts will be made in the consolidation process (including the creation of new accounts), if the price paid for the 100% is:

a. $800,000.

b. $600,000.

c. $30,000.

AppendixLO1