Company X acquired for cash all of the outstanding common stock of Company Y. How should Company X determine in general the amounts to be reported for the inventories and long-term debt acquired from Company Y? Inventories Long-term debt A. Fair value Fair value B. Fair value Recorded value C. Recorded value Fair value D. Recorded value Recorded value A: A. B: B. C: C. D: D. On April 1, 2010, Union Company paid $1,600,000 for all the issued and outstanding common stock of Cable Corporation in a transaction properly accounted for as an acquisition. The recorded assets and liabilities of Cable Corporation on April 1, 2010, were as follows: Cash $ 160,000 Inventory 480,000 Property, plant and equipment (net) 960,000 Liabilities (360,000) On April 1, 2010, it was determined that Cable's inventory had a fair value of $460,000, and the property, plant and equipment (net) had a fair value of $1,040,000. What is the amount of goodwill resulting from the business combination? A: $0 B: $ 20,000 C: $300,000 D: $360,000 On April 1, 2010, Union Company paid $1,600,000 for all the issued and outstanding common stock of Cable Corporation in a transaction properly accounted for as an acquisition. The recorded assets and liabilities of Cable Corporation on April 1, 2010, were as follows: Cash $ 160,000 Inventory 480,000 Property, plant and equipment (net) 960,000 Liabilities (360,000) On April 1, 2010, it was determined that Cable's inventory had a fair value of $460,000, and the property, plant and equipment (net) had a fair value of $1,040,000. What is the amount of goodwill resulting from the business combination? A: $0 B: $ 20,000 C: $300,000 D: $360,000 The separate condensed balance sheets and income statements of Purl Corp. and its wholly owned subsidiary, Scott Corp., are as follows: BALANCE SHEETS December 31, 2010 Purl Scott Assets Current assets: Cash $ 80,000 $ 60,000 Accounts receivable (net) 140,000 25,000 Inventories 90,000 50,000 Total current assets 310,000 135,000 Property, plant, and equipment (net) 625,000 280,000 Investment in Scott (equity method) 400,000 Total assets $1,335,000 $415,000 Liabilities and Stockholders Equity Current liabilities: Accounts payable $ 160,000 $ 95,000 Accrued liabilities 110,000 30,000 Total current liabilities 270,000 125,000 Stockholders equity: Common stock ($10 par) 300,000 50,000 Additional paid-in capital 10,000 Retained earnings 765,000 230,000 Total stockholders equity 1,065,000 290,000 Total liabilities and stockholders equity $1,335,000 $415,000 INCOME STATEMENTS For the year ended December 31, 2010 Purl Scott Sales $2,000,000 $750,000 Cost of goods sold 1,540,000 500,000 Gross margin 460,000 250,000 Operating expenses 260,000 150,000 Operating income 200,000 100,000 Equity in earnings of Scott 70,000 Income before income taxes 270,000 100,000 Provision for income taxes 60,000 30,000 Net income $ 210,000 $ 70,000 Additional information: On January 1, 2010, Purl purchased for $360,000 all of Scott's $10 par, voting common stock. On January 1, 2010, the fair value of Scott's assets and liabilities equaled their carrying amount of $410,000 and $160,000, respectively, except that the fair values of certain items identifiable in Scott's inventory were $10,000 more than their carrying amounts. These items were still on hand at December 31, 2010. Goodwill is determined to be unimpaired at December 31, 2010. During 2010, Purl and Scott paid cash dividends of $100,000 and $30,000, respectively. For tax purposes, Purl receives the 100% exclusion for dividends received from Scott. There were no intercompany transactions, except for Purl's receipt of dividends from Scott and Purl's recording of its share of Scott's earnings. Both Purl and Scott paid income taxes at the rate of 30%. In the December 31, 2010, consolidated financial statements of Purl and its subsidiary, total assets should be A: $1,740,000 B: $1,460,000 C: $1,350,000 D: $1,325,000 The separate condensed balance sheets and income statements of Purl Corp. and its wholly owned subsidiary, Scott Corp., are as follows: BALANCE SHEETS December 31, 2010 Purl Scott Assets Current assets: Cash $ 80,000 $ 60,000 Accounts receivable (net) 140,000 25,000 Inventories 90,000 50,000 Total current assets 310,000 135,000 Property, plant, and equipment (net) 625,000 280,000 Investment in Scott (equity method) 400,000 Total assets $1,335,000 $415,000 Liabilities and Stockholders Equity Current liabilities: Accounts payable $ 160,000 $ 95,000 Accrued liabilities 110,000 30,000 Total current liabilities 270,000 125,000 Stockholders equity: Common stock ($10 par) 300,000 50,000 Additional paid-in capital 10,000 Retained earnings 765,000 230,000 Total stockholders equity 1,065,000 290,000 Total liabilities and stockholders equity $1,335,000 $415,000 INCOME STATEMENTS For the year ended December 31, 2010 Purl Scott Sales $2,000,000 $750,000 Cost of goods sold 1,540,000 500,000 Gross margin 460,000 250,000 Operating expenses 260,000 150,000 Operating income 200,000 100,000 Equity in earnings of Scott 70,000 Income before income taxes 270,000 100,000 Provision for income taxes 60,000 30,000 Net income $ 210,000 $ 70,000 Additional information: On January 1, 2010, Purl purchased for $360,000 all of Scott's $10 par, voting common stock. On January 1, 2010, the fair value of Scott's assets and liabilities equaled their carrying amount of $410,000 and $160,000, respectively, except that the fair values of certain items identifiable in Scott's inventory were $10,000 more than their carrying amounts. These items were still on hand at December 31, 2010. Goodwill is determined to be unimpaired at December 31, 2010. During 2010, Purl and Scott paid cash dividends of $100,000 and $30,000, respectively. For tax purposes, Purl receives the 100% exclusion for dividends received from Scott. There were no intercompany transactions, except for Purl's receipt of dividends from Scott and Purl's recording of its share of Scott's earnings. Both Purl and Scott paid income taxes at the rate of 30%. In the December 31, 2010, consolidated financial statements of Purl and its subsidiary, total assets should be A: $1,740,000 B: $1,460,000 C: $1,350,000 D: $1,325,000