Question: Nugget Company’s balance sheet on December
Nugget Company’s balance sheet on December 31, 20X6, was as follows:
On December 31, 20X6, Gold Company acquired all of Nugget’s outstanding common stock for $1,500,000 cash. On that date, the fair (market) value of Nugget’s inventories was $450,000, and the fair value of Nugget’s property, plant, and equipment was $1,000,000. The fair values of all other assets and liabilities of Nugget were equal to their book values.
As a result of Gold’s acquisition of Nugget, the consolidated balance sheet of Gold and Nugget should reflect goodwill in the amount of
a. $500,000.
b. $550,000.
c. $600,000.
d. $650,000.
Assuming Gold uses the equity method to account for investments and that Gold’s (unconsolidated) balance sheet on December 31, 20X6, reflected retained earnings of $2,000,000, what amount of retained earnings should be shown in the December 31, 20X6, consolidated balance sheet of Gold and its new subsidiary, Nugget?
a. $2,000,000.
b. $2,600,000.
c. $2,800,000.
d. $3,150,000.
Transcribed Image Text:
Assets Liabilities & Stockholders' Equity Cash Accounts Receivable Inventories $ 100,000 Current Liabilities 200,000 Long-Term Debt 500,000 Common Stock (par $1 per share) 900,000 Additional Paid-In Capital Retained Earnings $ 300,000 500,000 100,000 200,000 600,000 Property, Plant & Equipment (net) Total Assets $1,700,000 Total Liabilities & Stockholders' Equity $1,700,000
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