On January 1, 2009, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is:

36. Determine the amount and account to be recorded for Nichols' investment in Smith. A. $1,324,000 for Investment in Smith. B. $1,200,000 for Investment in Smith. C. $1,200,000 for Investment in Smith's Common Stock and $124,000 for Investment in Smith's Preferred Stock. D. $1,200,000 for Investment in Smith's Common Stock and $120,000 for Investment in Smith's Preferred Stock. E. $1,448,000 for Investment in Smith's Common Stock.

37. Compute the goodwill recognized in consolidation. A. $800,000 B. $310,000. C. $124,000. D. $0. E. $(196,000).