Pillow Company is purchasing an 80% interest in the common stock of Sleep Company. Sleep’s balance sheet amounts at book and fair value are as follows:
|
Account |
Book Value |
Fair Value |
|
Current assets |
$200,000 |
$250,000 |
|
Fixed assets |
350,000 |
800,000 |
|
Liabilities |
200,000 |
200,000 |
What adjustments to recorded values of Sleep Company’s accounts will be made in the consolidation process (including the creation of new accounts), if the price paid for the 100% is:
a. $800,000.
b. $600,000.
c. $30,000.