The following balance sheets are for the Denver Company and

the Colorado Company as of January 1, 19xl. The statements

are presented as they appeared immediately before the acquisition

of Colorado Company stock by the Denver Company.

The following balance sheets are for the Denver Company and
the Colorado Company as of January 1, 19xl. The statements
are presented as they appeared immediately before the acquisition
of Colorado Company stock by the Denver Company.

Assets
Other Current Assets
Inventory
Equipment
Accumulated Depreciation
-Equipment
Buildings
Accumulated Depreciation
-Buildings

Equities
Current Liabilities
Bonds Payable
Premium on Bonds
Capital StockDenver ($10 par)
Capital StockColorado ($25 par)
Premium on StockColorado
Retained EarningsDenver
Retained EarningsColorado

January 1, 19×1
Denver
Company
$ 2,000,000
250,000
4,000,000

Colorado
Company
$ 100,000
130,000
2,400,000

(1,500,000)
6,000,000

(1,600,000)
4,000,000

(3,000,000)
$7,750,000

(2,500,000)
$2,530,000

$ 400,000
3,000,000

$ 75,000
1,500,000
150,000

3,000,000
500,000
100,000
1,350,000
$7,750,000

205,000
$2,530,000

6. Assume that the Denver Company is to acquire all of the
Colorado Company stock by issuing new shares of its
own stock as consideration. Also assume that the market
value of the Denver Company stock at the time of the exchange
is $30 per share and that the market value per
share of the Colorado Company stock is $50 per share. Let
the market value of each stock at the date of acquisition
be the sole determinant. What is the number of shares
which the Denver Company must issue to the Colorado
Company shareholders?
A. 16,667
B. 20,000

c. 33,333
D. 50,000

7. Assume that the Denver Company issues 55,000 shares
in exchange for all of the Colorado Company stock, and
that there is no need to adjust the financial statements of
either because of different accounting methods being employed.
If all the requirements for using the pooling method are
met, the amount of consolidated retained earnings on the
consolidated balance sheet at date of acquisition would be
A. 0.
B. $205,000.
c. $1,350,000.
D. $1,555,000.

8. Assume that the purchase method is used and that the
Denver Company debited its investment account for the
fair market value of the stock given in exchange, and that
the market value of the Colorado Company's equipment
was $150,000 greater than the book value at date of acquisition.
The amount of Excess of Acquisition Cost over
Book Value of Acquired Subsidiary on the January 1, 19×1,
consolidated balance sheet would be
A. $205,000.
B. $195,000.

c. $45,000.
D. 0.

For questions 9 and 10 assume that the Denver Company acquired
on January 1, 19×1, 15,000 shares of Colorado Company
stock by paying $900,000 in cash plus broker's fees of
$25;000.
9. Assuming that the legal method of valuing minority interest
is used, the amount of Excess of Acquisition Cost
Over Book Value of Acquired Subsidiary to be shown on
the consolidated balance sheet on January 1, 19×1, should
be
A. $321,250.
B. $201,250.

c. $120,000.
D. $95,000.
10. Assuming that the entity method of valuing minority interest
is used, the amount to be shown for Minority Interest
on the January 1, 19×1, consolidated balance sheet
should be
A. $121,250.
B. $201,250.

c. $300,000.
D. $308,333.