Quiz3 SOLUTION

Quiz3 SOLUTION - QUIZ 3A ACCT455/555 SOLUTION On January 1,...

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QUIZ 3A ACCT455/555 SOLUTION On January 1, 20X1, the Moody company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $550 in long-term liabilities and 50 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants and brokers for assistance in bringing about this purchase. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Note: Parentheses indicate a credit balance. In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40 and Buildings by $60. The transaction was accounted for as an acquisition. What amount was recorded as the investment in Osorio? $550 + 50 SHARES X 10 FAIR VALUE 500 = $1,050 How much goodwill will be recognized on Moody’s books? $1,050 – 920 BOOK VALUE – 110 FV-BV = $20 GOODWILL
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Quiz3 SOLUTION - QUIZ 3A ACCT455/555 SOLUTION On January 1,...

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