For the fiscal year ending December 31, how will consolidated net income of this business combination be determined if Hill acquires all of Loring’s stock?
a. Hill’s income for the past year plus Loring’s income for the past six months.
b. Hill’s income for the past year plus Loring’s income for the past year.
c. Hill’s income for the past six months plus Loring’s income for the past six months.
d. Hill’s income for the past six months plus Loring’s income for the past year.
Hill, Inc., obtains control over Loring, Inc., on July 1. The book value and fair value of Loring’s accounts on that date (prior to creating the combination) follow, along with the book value of Hill’s accounts:
| Hill Book Values | Loring Book Values | Loring Fair Values |
Revenues | $(250,000) | $(130,000) |
|
Expenses | 170,000 | 80,000 |
|
Retained earnings, 1/1 | (130,000) | (150,000) |
|
Cash and receivables | 140,000 | 60,000 | $ 60,000 |
Inventory | 190,000 | 145,000 | 175,000 |
Patented technology (net) | 230,000 | 180,000 | 200,000 |
Land | 400,000 | 200,000 | 225,000 |
Buildings and equipment (net) | 100,000 | 75,000 | 75,000 |
Liabilities | (540,000) | (360,000) | (350,000) |
Common stock | (300,000) | (70,000) |
|
Additional paid-in capital | (10,000) | (30,000) |
|
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