On January 1, 2018, Chester Inc. acquires 100% of Festus Corp.'s outstanding common stock by exchanging 37,500 shares of Chester's $2 par value common voting stock. On January 1, 2018, Chester's voting common stock had a fair value of $40 per share. Festus' voting common shares were selling for $6.50 per share. Festus' balances on the acquisition date, just prior to acquisition are listed below. Book Value Fair Value
Cash $ 30,000
Accounts Receivable 120,000 $ 120,000
Inventory 200,000 230,000
Land 230,000 290,000
Building (net) 450,000 600,000
Equipment (net) 175,000 160,000
Accounts Payable (80,000) (80,000)
Common Stock $1 par (500,000)
Paid-in Capital (350,000)
Retained Earnings 1/1/18 (275,000)
Q1 – What Kind of combination is the purchase of Festus by Chester?
Q2 – What is the amount of Consideration?
Q3 – What is the Fair Value of Festus Corp Assets?
Q4 – Does the combination or purchase of Festus created Goodwill or a Bargain Gain?
Q5 – Compute amount of Goodwill or bargain Gain.