Question
On January 1, 2021, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred
On January 1, 2021, 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. There was no premium in the value of consideration transferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: Common stock, $10 par value (50,000 shares outstanding) Preferred stock, 6% cumulative, $100 par value, 3,000 shares outstanding Additional paid in capital Retained earnings Total stockholders' equity Compute the goodwill recognized in consolidation. Multiple Choice $ 500,000 300,000 200,000 500,000 $1,500,000
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