Pinehollow acquired 80% of the outstanding stock of Stonebriar by issuing 80,000 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 companies have 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
Total assets $3,400,000 $1,900,000
Liabilities and Stockholders' Equity
Current liabilities $ 300,000 $ 100,000
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
Total liabilities and equity $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. What is the amount of goodwill that will be included in the consolidated balance sheet immediately following the acquisition?
a. $300,000
b. $100,000
c. $200,000
d. $240,000
b
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