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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