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The condensed balance sheets for Rice & Associates and Rachel Company as of December 30, 2016 are shown in Exhibit 1. On December 31, 2016, Rice & Associates purchased 80.0 percent of Rachel Company for $140,000 by issuing 50,000 shares of its previously authorized common stock. As of December 31, 2016, the fair values of Rachel Companys assets and liabilities are shown below, including customer lists, an intangible asset identified during the acquisition:

Cash $10,000

Accounts receivable 40,000

Inventory 70,000

Property, plant and equipment 120,000

Customer lists 10,000

Accounts payable 15,000

Long-term liabilities 65,000

Required:

a. Prepare a consolidated balance sheet immediately after the acquisition on December 31, 2016.

b. Will an account called investment in Rachel Company appear as an asset in Rice & Associates un-consolidated balance sheet? (circle one) Yes or No? Explain.

c. Will an account called investment in Rachel Company appear as an asset in Rice & Associates consolidated balance sheet? (circle one) Yes or No? Explain.

d. Will an account called goodwill appear as an asset in Rice & Associates un-consolidated balance sheet? (circle one) Yes or No? Explain.

e. Will an account called goodwill appear as an asset in Rachel Companys un-consolidated balance sheet? (circle one) Yes or No? Explain.

		EXHIBIT 1
		RICE & ASSOCIATES AND RACHEL
		BALANCE SHEETS
		Before Acquisition of Rachel
			Rice Before
			Issue Stock
		Assets	for Rachel	Rachel
		Cash	$56,000	$10,000
		Accounts receivable	150,000	40,000
		Inventory	300,000	40,000
		Property, plant & equipment	400,000	130,000
		Total assets	$906,000	$220,000
		Liabilities & Stockholder's Equity
		Accounts payable	$80,000	$20,000
		Long-term liabilities	300,000	50,000
		Common stock, par value $1	350,000	90,000
		Capital paid in excess of par value	50,000	10,000
		Retained earnings	126,000	50,000
		Total liabilities & stockholder's equity	$906,000	$220,000

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