17-20

Corporation in a transaction y paid $950,000 for all the issued and outstanding stock of Simon Corporation on Aprit poperly recorded as a purchase. The recorded assets and liabilities of the Cash Inventory Property and equipment s 80,000 240,000 (net of accumulated depreciation of $320,000) 480,000 (180,000) On April 1, 20X1, it was determined that the inventory of Paape had a fair value of $190,000, and the property and equipment (net) had a fair value of S560,000. What is the amount of goodwill resulting from the business combination? a. $0 b. $120,000 C. $300,000 d. $230,000 Paro Company purchased 80% of the voting com mon stock of Sabon Company for $900,000. There are no liabilities. The following book and fair values are available: 18 Book Value $100,000 Fair Value 200,000 $200,000 200,000 Current assets Land and building Machinery Goodwill Macn 600,000 300,000 100,000 Using the parent company concept, the machinery will appear on the consolidated balance sheet at a. $600,000 b. $540,000 c. $480,000 d. $300,000 When a company purchases another company that has existing goodwill and the transaction is accounted for as a stock acquisition, the goodwill should be treated in the following manner. 19. Goodwill on the books of an acquired company should be disregarded. Goodwill is recorded prior to recording fixed assets. Goodwill is not recorded until all assets are stated at full fair value. Goodwill is treated consistent with other tangible assets. a. b. c. d. 20. The SEC requires the use of push-down accounting in some specific situations. Push-down accounting results in: goodwill be recorded in the parent company separate accounts. eliminating subsidiary retained earnings and paid-in capital in excess of par. reflecting fair values on the subsidiary's separate accounts. changing the consolidation worksheet procedure because no adjustment is necessary to eliminate the investment in subsidiary account. a. b. c. d