1. Pop Corporation paid $100,000 cash for the net assets of Son Company, which consisted of the...

Question:

1. Pop Corporation paid $100,000 cash for the net assets of Son Company, which consisted of the following:

___________________ Book Value ______________ Fair Value

Current assets ........... $ 40,000 ........................... $ 56,000

Plant and equipment ... 160,000 ............................ 220,000

Liabilities assumed .... (40,000) ........................... (36,000)

............................$160,000 ..........................$240,000

Assume Son Company is dissolved. The plant and equipment acquired in this business combination should be recorded at:

a. $220,000

b. $200,000

c. $183,332

d. $180,000

2. On April 1, Pam Company paid $1,600,000 for all the issued and outstanding common stock of Sun Corporation in a transaction properly accounted for as an acquisition. Sun Corporation is dissolved. The recorded assets and liabilities of Sun Corporation on April 1 follow:

Cash ............................................... $160,000

Inventory .......................................... 480,000

Property and equipment (net of accumulated

depreciation of $640,000) ...................... 960,000

Liabilities ..................................... (360,000)

On April 1, it was determined that the inventory of Sun had a fair value of $380,000, and the property and equipment (net) had a fair value of $1,120,000. What is the amount of goodwill resulting from the acquisition?

a. 0

b. $100,000

c. $300,000

d. $360,000

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