Reference no: EM132550630

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

?Question 1: 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