On January 1, 2021, Nichols Company Acquired 80% of Smith

question 41

Multiple Choice

On January 1, 2021, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. There was no premium in the value of consideration transferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: Compute the goodwill recognized in consolidation.

• A) $800,000.
• B) $310,000.
• C) $124,000.
• D) $0.
• E) $(196,000).

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Definitions:

Equilibrium Market Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price point, during a specific time period.

Equilibrium Market Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded in the market, leading to no excess supply or demand.

Bricklayers

Skilled tradespeople who lay bricks, blocks, and other types of building materials to construct or repair walls, partitions, and other structures.