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

question 91

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:

45 Degree Line

A reference line in economic graphs that represents where the value of the independent variable is equal to the value of the dependent variable.

Income

The money received, usually from a job, business, or assets, over a certain period of time.

Income Distribution

The way in which total income is shared among the population or different segments of the economy.

Unequal

Lacking equality in size, quantity, or degree; not evenly distributed or balanced.