29 Jun Question Pinehollow acquired
Question
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the have companies has the following balance sheets:
…………………………..
Assets
Pinehollow
Stonebriar
Cash
$
150,000
$
50,000
Accounts receivable……………..
500,000
350,000
Inventory………………………
900,000
600,000
Property, plant, and equipment(net).
1,850,000
900,000
……………………Totalassets
$3,400,000
$1,900,000
==========
==========
Liabilities and Stockholders’ Equity
$
100,000
Current liabilities……………..
$
300,000
Bonds payable…………………..
1,000,000
600,000
Common stock ($1 par)……………
300,000
100,000
Paid-in capital in excess of par….
800,000
900,000
Retained earnings……………….
1,000,000
200,000
……..Totalliabilitiesandequity
$3,400,000
$1,900,000
==========
==========
The fair values of Stonebriar’s inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.
________________________________________________________________
15. Refer to the Pinehollow-Stonebriar Scenario. The journal entry to record the purchase of Stonebriar would include a
a. credit to common stock for $1,500,000.
b. credit to additional paid-in capital for $1,100,000.
c. credit to cash for $1,525,000.
d. debit to investment for $1,525,000.
2-5
Chapter 2
16. Goodwill associated with the purchase of Stonebriar is __________.
a. $100,000
b. $125,000
c. $300,000
d. $325,000
17. On April 1, 20X1, Paape Company paid $950,000 for all the issued and outstanding stock of Simon Corporation in a transaction properly recorded as a purchase. The recorded assets and liabilities of the Prime Corporation on April 1, 20X1, follow:
Cash………………………………………
$ 80,000
Inventory………………………………….
240,000
Property and equipment
(net of accumulated depreciation
480,000
of $320,000)…………………………….
Liabilities………………………………..
(180,000)
On April 1, 20X1, it was determined that the inventory of Paape had a fair value of $190,000, and the property and equipment (net) had a fair value of $560,000. What is the amount of goodwill resulting from the business combination?
a. $0
b. $120,000
c. $300,000
d. $230,000
18. Paro Company purchased 80% of the voting common stock of Sabon Company for $900,000. There are no liabilities. The following book and fair values are available:
………………….
Current assets
Book Value
Fair Value
$100,000
$200,000
Land and building……………….
200,000
200,000
Machinery………………………
300,000
600,000
Goodwill……………………….
100,000
?
Using the parent company concept, the machinery will appear on the consolidated balance sheet at __________.
a. $600,000
b. $540,000
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