P12A-1

Analyzing Goodwill and Reporting the Consolidated Balance Sheet

On January 4, 2011, Big Company acquired all 8,000 outstanding shares of Small Company for $12 cash per share. Immediately after the acquisition, the balance sheets reflected the following:

*The Fair market value of the Property and Equipment (net) of Small Company is $74,000.

Required:

1.		Give the journal entry that Big Company made to record the acquisition.
2.		Analyze the acquisition to determine the amount of goodwill purchased.
3.		Should Small Company's assets be included on the consolidated balance sheet at book value or fair value? Explain.
4.		Prepare a consolidated balance sheet immediately after acquisition. (Hint: Consider your answer to requirement 3.)