Pillow Company is purchasing an 80% interest in the common stock of Sleep Company. Sleep’s balance sheet amounts at book and fair values are as follows:Account Book Value Fair ValueCurrent Assets . . . . . . . . . . . . $ 200,000 $ 250,000Fixed Assets . . . . . . . . . . . . . . 350,000 800,000Liabilities . . . . . . . . . . . . . . . . (200,000) (200,000)Use valuation analysis schedules to determine what adjustments to recorded values of Sleep Company’s accounts will be made in the consolidation process (including the creation of new accounts), if the price paid for the 80% is:a. $800,000.b. $600,000.
Pillow Company is purchasing an 80% interest in the common stock of Sleep Company. Sleep’s balance sheet amounts at book and fair values are as follows:
Account Book Value Fair Value
Current Assets . . . . . . . . . . . . $ 200,000 $ 250,000
Fixed Assets . . . . . . . . . . . . . . 350,000 800,000
Liabilities . . . . . . . . . . . . . . . . (200,000) (200,000)
Use valuation analysis schedules to determine what adjustments to recorded values of Sleep Company’s accounts will be made in the consolidation process (including the creation of new accounts), if the price paid for the 80% is:
a. $800,000.
b. $600,000.
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