Perry Company Acquires 100% of the Stock of Hurley Corporation

Multiple Choice

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2012, for $3,800 cash. As of that date Hurley has the following trial balance; $\begin{array}{lr} & \text { Debit } &\text { Credit }\\\text { Cash } & \$ 500 \\\text { Accounts receivable } & 600 \\\text { Inventory } & 800 \\\text { Buildings (net) (5 year life) } & 1,500 \\\text { Equipment (net) (2 year life) } & 1,000 \\\text { Land } & 900\\\text { Accounts payable } && \$ 400 \\\text { Long -term liabilities (due 12/31/15) } && 1,800 \\\text { Common stock } && 1,000 \\\text { Additional paid -in capital } && 600 \\\text { Retained earnings } && 1,500\\\text { Total }&\$5,300&\$5,300\end{array}$

$\text { Net income and dividends reported by Hurley for } 2012 \text { and } 2013 \text { follow }$

$\begin{array}{lrr} & \mathbf{2 0 1 2} & \mathbf{2 0 1 3} \\\text { Net income } & \mathbf{\$ 1 0 0} & \$ 120 \\\text { Dividends } & 30 & 40\end{array}$

$\text { The fair value of Hurley's net assets that differ from their book values }$$\text { are listed below: }$

$\begin{array}{lc} & \text { Fair Value } \\\text { Inventory } & \$ 900 \\\text { Buildings } & 1,200 \\\text { Equipment } & 1,250 \\\text { Land } & 1,300 \\\text { Long -term liabilities } & 1,700\end{array}$ 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 goodwill, if any, at January 1, 2012.

A) $150.
B) $250.
C) $700.
D) $1,200.
E) $550.