Sunshine, Inc. acquired 100% of the voting com non stock of Green Grass. Inc. by

Question

Sunshine, Inc. acquired 100% of the voting com non stock of Green Grass. Inc. by transferring the following consideration to Grean Grass' shareholders: In addition. Sunshine paid $12,000 direct cost of carrying out the combination. At the date of the acquisition. Sunshine's common stock was selling in an active market for $18 per share. Also, at the date of the acquisition. Green Grass had the following assets and liabilities with the book values and fair values shown: Which one of the following is the amount of goodwill or bargain purchase gain that results from Sunshine's acquisition of Green Grass? $10,000 Goodwill $10,000 Bargain purchase gain $20,000 Bargain purchase gain $32,000 Goodwill Which one of the following circumstances will not impact directly the adjustments eliminations, or related amounts in the consolidating process? Whether the parent company is a manufacturing firm or a service firm. Whether the parents uses the cost or equity method to carry the investment in a subsidiary on its books Whether the parent owns 100% or less than 100% of the subsidiary. Whether transactions between the affiliated entities originate with the parents or with a subsidiary.

Explanation / Answer

6) Book Value of assets of the acquirer 200000 Less Book value of liabilities of the acquirer 60000 Value to be transferred 140000 Amount paid by the acquiree Cash 70000 Common stock 50000 Total amount 120000 Bargain purchase gain ( 140000 - 120000) 20000 Hence option C is correct 7) Option A is correct Whether the parent company is a manufacturing firm or service firm will not impact directly the adjustments , eliminations or related amounts in consolidation process

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