On January 1, 2013, Nichols Company Acquired 80% of Smith

question 16

Multiple Choice

On January 1, 2013, 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. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: $\begin{array}{l}\text { Common stock, } \$ 10 \text { par value }(50,000 \text { shares outstanding }) &\$500,000\\\text { Preferred stock, } 6 \% \text { cumulative, } \$ 100 \text { par value, }\\3,000 \text { shares outstanding } & 300,000 \\\text { Additional paid in capital } & 200,000 \\\text { Retained earnings } & 500,000\\\text { Total stockholders' equity }&\$1,500,000\end{array}$ The consolidation entry at date of acquisition will include (referring to Smith) :

• A)Debit Common stock $500,000 and debit Preferred stock $120,000.
• B)Debit Common stock $400,000 and debit Additional paid-in capital $160,000.
• C)Debit Common stock $500,000 and debit Preferred stock $300,000.
• D)Debit Common stock $500,000, debit Preferred stock $120,000, and debit Additional paid-in capital $200,000.
• E)Debit Common stock $400,000, debit Preferred stock $300,000, debit Additional paid-in capital $200,000, and debit Retained earnings $500,000.

---

Definitions:

Structural Strain Theory

A sociological perspective that views social structures as sources of deviance and societal pressures that push individuals toward criminal behavior.

Robert Merton

A distinguished sociologist who contributed significantly to the sociology of science and developed the theory of social structure and anomie.

Sociological Researcher

An investigator who conducts studies to understand human behavior, social interactions, and societal structures using various methods and theoretical perspectives.

Cyberattacks

Malicious attempts to damage, disrupt, or gain unauthorized access to computer systems, networks, or devices.