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Allen, Inc., obtains control over Tucker,Inc., on July 1, 2004. Consolidations.

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Accounting Problems

Problems 14 through 17 are based on the following information: Allen, Inc., obtains control over Tucker,
Inc., on July 1, 2004. The book value and fair market value of Tucker's accounts on that date (prior to creating
the combination) follow, along with the book value of Allen's accounts:

(see attached)

14. Assume that Allen issues 10,000 shares of common stock with a $5 par value and a $40 fair market
value to obtain all of Tucker's outstanding stock. How much goodwill should be recognized?
a. -0-
b. $15,000
c. $35,000
d. $100,000

15. For the fiscal year ending December 31, 2004, how will consolidated net income of this business
combination be determined if Allen acquires all of Tucker's stock in a purchase?
a. Allen's income for the past year plus Tucker's income for the past six months.
b. Allen's income for the past year plus Tucker's income for the past year.
c. Allen's income for the past six months plus Tucker's income for the past six months.
d. Allen's income for the past six months plus Tucker's income for the past year.

16. Assume that Allen issues preferred stock with a par value of $200,000 and a fair market value of
$335,000 for all shares of Tucker. What will be the balance in the consolidated Inventory, Land, and
beginning Retained Earnings accounts?
a. $365,000, $410,000, and $130,000.
b. $365,000, $430,000, and $130,000.
c. $352,500, $417,500, and $280,000.
d. $335,000, $430,000, and $280,000.

17. Assume that Allen pays a total of $370,000 in cash for all of the shares of Tucker. In addition, Allen
pays $30,000 to a group of attorneys for their work in arranging the acquisition. What will be the
balance in consolidated goodwill and retained earnings?
a. 0 and $90,000.
b. 0 and $280,000.
c. $15,000 and $280,000.
d. $15,000 and $130,000.
(AICPA adapted)

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