Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along with the book value of Bullen's accounts:
Assume that Bullen issued preferred stock with a par value of $240,000 and a fair value of $500,000 for all of the outstanding shares of Vicker in an acquisition business combination. What will be the balance in the consolidated Inventory and Land accounts?

Question

Quizplus · Accepted Answer

To calculate the consolidated balance in Inventory and Land accounts, we need to add the book value of these accounts for both companies and adjust for any differences between book value and fair value resulting from the business combination.
Consolidated Inventory balance:
Book value: $240,000 (Bullen) + $200,000 (Vicker) = $440,000
Adjustment: None mentioned, so we assume that Book value = Fair value
Consolidated Inventory balance = $440,000
Consolidated Land balance:
Book value: $400,000 (Bullen) + $120,000 (Vicker) = $520,000
Adjustment: Fair value of Vicker's Land account is $180,000, which is $60,000 more than book value. This adjustment needs to be added to the consolidated balance.
Consolidated Land balance = $520,000 + $60,000 = $580,000
Therefore, the correct answer is B) $440,000, $520,000.