Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. Compute the amount of Hurley's inventory that would be reported in a January 1, 2010, consolidated balance sheet.

Question

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance;  Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. Compute the amount of Hurley's inventory that would be reported in a January 1, 2010, consolidated balance sheet.

Quizplus · Accepted Answer

The question mentions that Perry Company uses the FIFO inventory valuation method. As of January 1, 2010, Hurley's inventory has a net book value of $900. Since Perry acquires 100% of Hurley's stock, the consolidated balance sheet will include all of Hurley's assets and liabilities, including the inventory. Therefore, $900 should be reported as Hurley's inventory in the consolidated balance sheet. The excess of consideration transferred over fair value of net assets acquired (i.e. goodwill) does not affect the amount of inventory reported.

Perry Company Acquires 100% of the Stock of Hurley Corporation