Assume that on January 1, 2018, an investor company acquired 100% of the outstanding voting common stock of an investee company in exchange for $200,000 in cash. The transaction is qualified as a non-taxable transaction under the Internal Revenue Code. The following financial statement information is for the investee company on January 1, 2018, prepared immediately before this transaction.

Book Values Investee

Current assets $70,000 Goodwill 10,000 Property 110,000 Total Assets $190,000 Current Liabilities $ 50,000 Noncurrent liabilities 45,000 Common Stock ($1 par) 85,000 Retained Earnings 10,000 Total Liabilities & Equity $190,000

Assume that the fair values of the investees net assets approximated their recorded book values, except (1) the fair value of the investees property is $180,000 and (2) the fair value of current liabilities is $90,000. In addition, the investees pre-transaction tax bases of its assets and liabilities approximate their reported book values. Any differences between fair value and tax bases relate entirely to tax-deductible items. The tax rate for the investor and investee is 21%.

1. Determine the amount of deferred tax asset (liability) that should be reported on the investors consolidated balance sheet immediately after this business combination. Prior to the business combination, neither the investor nor the investee had deferred tax asset (liability) in their financial statements. Record the deferred tax asset as positive amount and deferred tax liability as negative amount. Show your work.

2. Determine the amount of goodwill that should be reported on the investors consolidated balance sheet immediately after this business combination and show your work