Use the Following Information to Answer Questions

question 33

Multiple Choice

Use the following information to answer questions
Posch Company issued 12,000 shares of its $20 par value common stock for the net assets of Sato Company in a business combination under which Sato Company will be merged into Posch Company.On the date of the combination, Posch Company common stock had a fair value of $30 per share.Balance sheets for Posch Company and Sato Company immediately prior to the combination were as follows:
-If the business combination is treated as an acquisition and the fair value of Sato Company's current assets is $135,000, its plant and equipment is $363,000, and its liabilities are $84,000, Posch Company's financial statements immediately after the combination will include

• A)Negative goodwill of $54,000.
• B)Plant and equipment of $1,226,000.
• C)Plant and equipment of $1,172,000.
• D)An extraordinary gain of $54,000.

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Definitions:

Transferred Item

Goods that are moved from one process, department, or location to another within the same company.

Outside Supplier

A third-party entity that provides goods or services to a business.

Residual Income

Income that remains after all operating expenses, including cost of capital, are subtracted from revenue, often used in performance measurement.

Investment Center

A business segment whose manager has control over cost, revenue, and investments in operating assets.