Bristle Corporation acquired 75 percent of Silver Corporation's common stock on December 31, 20X8, for $300,000. The
Question:
Bristle Corporation acquired 75 percent of Silver Corporation's common stock on December 31, 20X8, for $300,000. The fair value of the noncontrolling interest at that date was determined to be $100,000. Silver's balance sheet immediately before the combination reflected the following balances:
Cash and Receivables $40,000
Inventory70,000
Land90,000
Buildings and Equipment (net) 250,000
Total Assets $450,000
Accounts Payable$30,000
Income Taxes Payable40,000
Bonds Payable100,000
Common Stock100,000
Retained Earnings 180,000
Total Liabilities and Stockholders' Equity $450,000
A careful review of the fair value of Silver's assets and liabilities indicated that inventory, land, buildings and equipment (net) had fair values of $65,000, $100,000, and, $300,000 respectively. Goodwill is assigned proportionately to Bristle and the noncontrolling shareholders.
1. Based on the preceding information, what amount of goodwill will be reported in the consolidated balance sheet immediately following the acquisition?
A. $0
B. $120,000
C. $65,000
D. $20,000
2. Based on the preceding information, what amount will be reported as an investment in Silver Corporation stock in the consolidated balance sheet immediately following the acquisition?
A. $0
B. $210,000
C. $300,000
D. $400,000
Can you explain and show me why those are the answer?
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker