1. On January 1, Richard Company acquired all the net assets of Ulmer Company by issuing bonds with a face value and fair value of $500,000 and cash of $300,000. The fair values of Ulmer's identifiable net assets equaled their book values, except for buildings and equipment, which had a fair value of $120,000 greater than book value. Balance sheets for the two companies immediately preceding the acquisition were as follows:

 

 

Â	Richard Co.	Ulmer Co.
Cash	$400.000	$150,000
Buildings & Equipment	$700,000	$400,000
Accumulated Depreciation	$(300,000)	$(150,000)
Other Identifiable Assets	$100,000	$200,000
Total Assets	$900,000	$600,000
Â	Â	Â
Liabilities	$200,000	$100,000
Common Stock	$400.000	$300,000
Additional Paid-In Capital	$160,000	$100,000
Retained Earnings	$140,000	$100,000
Total Liabilities and Equity	$900,000	$600,000

Based on the information given above, the amount of Goodwill to be recognized in connection with the merger is:

Options:

A. 0
B. $180,000
C. $200,000
D. $300,000

 

1. Red Corporation merged with White Corporation. In the combination, White issued 27,000 shares of common stock, which at the date of combination had a market price of $18 per share. White acquired 100 percent of Red's voting common stock. The stockholders' equity section of each company's balance sheet just before the combination was:
   

Â	White	Red
Common Stock ($10 par)	$300,000	$150,000
Additional Paid-In Capital	$150,000	$30,000
Retained Earnings	$640,000	$120,000
Â	$990,000	$300,000

 

Refer to the above information. Assume the fair value of Red's identifiable net assets is $50,000 greater than their book value. In the balance sheet prepared immediately following the combination, goodwill should be reported at:

Options:

A. 0
B. $50,000
C. $136,000
D. $186,000

1. Stacey Co. exchanged 10,000 shares of common stock with a par value of $10 and market value of $25 for all the net assets of Taam Co. in a business combination. Legal costs to effect the merger totaled $10,000, and stock issue costs were $12,000. As a result of the combination, Stacey Co. should record increases in net assets and additional paid-in capital of:

Options:

Â	Net Assets	Additional Paid-In Capital
A.	$250,000	$138,000
B.	$260,000	$138,000
C.	$260,000	$150,000
D.	$272,000	$150,000