Practice Problems for Chapter 2 Consolidation of Financial Statements

[Q 1-3] Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 2020. The book value and fair value of Vicker's accounts on that date (prior to creating the combination) are as follows, along with the book value of Bullen's accounts:

Bullen Vicker Vicker Book Book Fair Value Value Value Retained earnings, 1/1/20 $250,000 $240,000 Cash and receivables 170,000 70,000 $70,000 Inventory 230,000 170,000 210,000 Land 280,000 220,000 240,000 Buildings (net) 480,000 240,000 270,000 Equipment (net) 120,000 90,000 90,000 Liabilities 650,000 430,000 420,000 Common stock 360,000 80,000 Additional paid-in capital 20,000 40,000

1. Assume that Bullen issued 12,000 shares of common stock, with a $5 par value and a $47 fair value, to obtain all of Vicker's outstanding stock. In this acquisition transaction, how much goodwill should be recognized? A) $144,000. B) $104,000. C) $ 64,000. D) $ 60,000. E) $ 0. 2. Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $47 fair value for all of the outstanding shares of Vicker. What will be the consolidated Additional Paid-In Capital and Retained Earnings (January 1, 2020 balances) as a result of this acquisition transaction? A) $60,000 and $490,000. B) $60,000 and $250,000. C) $380,000 and $250,000. D) $524,000 and $250,000. E) $524,000 and $420,000.

3. Assume that Bullen issued preferred stock with a par value of $240,000 and a fair value of $500,000 for all of the outstanding shares of Vicker in an acquisition business combination. What will be the balance in the consolidated Inventory and Land accounts? A) $440,000, $496,000. B) $440,000, $520,000. C) $425,000, $505,000. D) $400,000, $500,000. E) $427,000, $510,000.