In which one of the following cases will a non-cash asset transferred as consideration in a business combination be measured at carrying value, not at fair value?
Question 3
On January 1, 200x Ritt Corp. purchased 80 % of Shaw Corp.' s $ 10 par common stock for $ 975,000. On this date, the carrying amount of Shaw ' s net assets was $ 1,000,000. The fair values of Shaw ' s identifiable assets and liabilities were the same as their carrying amounts except for plant assets( net) which were $ 100,000 in excess of the carrying amount. On that date, the fair value of the 20 % noncontrolling interest in Shaw was appropriately determined to be $ 200,000. For the year ended December 31, 200x, Shaw had net income of $ 190,000 and paid cash dividends totaling $ 125,000. In the January 1, 200x consolidated balance sheet, goodwill should be reported at
Question 4
On December 31, 1988, Saxe Corporation was merged into Poe Corporation. In the business combination, Poe issued 200,000 shares of its $ 10 par common stock, with a market price of $ 18 a share, for all of Saxe ' s common stock. The stockholders ' equity section of each company ' s balance sheet immediately before the combination was: Assume that the merger is accounted for using the acquisition method of accounting. December 31, 1988 additional paid-in capital should be reported at
Question 5