Price Company issued 8,000 shares of its $20 par value common stock for the net assets of Sims Company in a business combination under which Sims Company will be merged into Price Company. On the date of the combination, Price Company common stock had a fair value of $30 per share. Balance sheets for Price Company and Sims Company immediately prior to the combination were:

Required:
Select the letter of the best answer.
1. If the business combination is treated as a purchase and Sims Company’s net assets have a fair value of $228,800, Price Company’s balance sheet immediately after the combination will include goodwill of
(a) $10,200.
(b) $12,800.
(c) $11,200.
(d) $18,800.
2. If the business combination is treated as a purchase and the fair value of Sims Company’s current assets is $90,000, its plant and equipment is $242,000, and its liabilities are $56,000, Price Company’s balance sheet immediately after the combination will include
(a) Negative goodwill of $36,000.
(b) Plant and equipment of $817,000.
(c) Gain of $36,000.
(d) Goodwill of$36,000.

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Price Sims Current assets Plant and equipment (net) Total Liabilities Common stock, $20 par value Other contributed capital Retained earnings Total 438,000 575,000 $1,013,000 300,000 550,000 72,500 90,500 $1,013,000 $64,000 136,000 $200,000 50,000 80,000 20,000 50,000 $200,000