Salem Co Had the Following Account Balances as of December 1

question 64

Essay

Salem Co. had the following account balances as of December 1, 2012: $\begin{array}{lr}\text { Inventory } & \$ 720,000 \\\text { Land } & 600,000 \\\text { Buildings - net (valued at } \$ 1,200,000) & 1,080,000 \\\text { Common stock (\$10 par value) } & 960,000\\\text { Retained earnings, December 1, } 2012 & 1,320,000 \\\text { Revenues } & 720,000 \\\text { Expenses } & 600,000\end{array}$ Bellington Inc. transferred $1.7 million in cash and 12,000 shares of its newly issued $30 par value common stock (valued at $90 per share) to acquire all of Salem's outstanding common stock.
Assume that Bellington paid cash of $2.8 million. No stock is issued. An additional $50,000 is paid in direct combination costs.
Required:
For Goodwill, determine what balance would be included in a December 1, 2012 consolidation.

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Definitions:

Allocated Fixed Costs

Costs that remain constant for a specific period regardless of the level of production or business activity, which are distributed across different departments or products.

Variable Departmental Costs

Costs that vary directly with the volume of output or level of activity within a specific department.

Direct Fixed Costs

Costs that are directly linked to a specific department or cost center and do not vary with the level of production or sales.

Discounted Cash Flow

A valuation method used to estimate the attractiveness of an investment opportunity by calculating the present value of expected future cash flows using a discount rate.