The following balance sheets were reported on January 1, 2011, for Peach Company and

Stream Company:

Required:
Appraisals reveal that the inventory has a fair value of $120,000, and the equipment has a current value of $410,000. The book value and fair value of liabilities are the same. Assuming that Peach Company wishes to acquire Stream for cash in an asset acquisition, determine the following cutoff amounts:
A. The purchase price above which Peach would record goodwill.
B. The purchase price below which the equipment would be recorded at less than its fair market value.
C. The purchase price below which Peach would record a gain.
D. The purchase price below which Peach would obtain a “bargain.”
E. The purchase price at which Peach would record $50,000 ofgoodwill.

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Peach Stream 100,000 300,000 880,000 $1,280,000 S00,000 400,000 250,000 330,000 $1,280,000 20.00() 100,000 380,000 $500,000 $10(),()()() 200,000 70,000 130,000 500,000 as Inventory Equipment (net) Total Total Liabilities Common stock, $20 par value Other contributed capital Retained earnings Total