The Following Balance Sheets Were Reported on January 1, 2016

question 36

Essay

The following balance sheets were reported on January 1, 2016, for Wood Company and Rose Company: Required:
Appraisals reveal that the inventory has a fair value $180,000, and the equipment has a current value of $615,000. The book value and fair value of liabilities are the same. Assuming that Wood Company wishes to acquire Rose for cash in an asset acquisition, determine the following cutoff amounts:
A. The purchase price above which Wood would record goodwill.
B. The purchase price at which Wood would record a $50,000 gain.
C. The purchase price below which Wood would obtain a "bargain."
D. The purchase price at which Wood would record $75,000 of goodwill.

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