Problem $6-16$

LO$2,3,6$

On January $1,$ Year $3,$ the Most Company purchased $80\%$ of the outstanding voting shares of the Least Company for $$1\mathrm{.}6$ million in cash. On that date, Least's balance sheet and the fair values of its identifiable assets and liabilities were as follows:

$\backslash$table$[[,$Carrying Value,Fair Value$],[$Cash$,$$$,25,000,$$$25,000$

The balance sheets as at December $31,$ Year $9,$ for the two companies were as follows:

BALANCE SHEETS

At December $31,$ Year $9$

$\backslash$table$[[,$Most,Least$],[$Cash$,$$$,500,000,40,000],[$Accounts receivable,$1,700,000,500,000],[$Inventories$,2,300,000,1,200,000$

Dividends declared on December $31,$ Year $9,$ were as follows:

$\backslash$table$[[$Most$,$$$350,000$

$($c$)$ What portion of the company's assets is inventory? What is the percentage increase or decrease in inventory from last year?

$($d$)$ What is the company's gross margin percentage? What is the percentage increase or decrease from last year?

$($e$)$ Does the company eliminate intercompany transactions and unrealized profits when preparing consolidated financial statements?

$($f$)$ What is the company's accounting policy for its land?

$($g$)$ What was the acquisition cost for all business acquisitions during $2019?$ What portion of the $2019$ acquisition cost was allocated to goodwill? What two businesses were acquired in $2019?$

$($h$)$ For the business acquisitions of franchise and nonfranchise stores and retail fuel locations, describe the items typically comprising the goodwill and explain why these items are not reported separately from goodwill.