Scenario 2-1 Pinehollow Acquired All of the Outstanding Stock of Stonebriar by Stonebriar

question 24

Multiple Choice

Scenario 2-1
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 companies have the following balance sheets:
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.
-Refer to Scenario 2-1. 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) debit to investment for $1,500,000.
• D) debit to investment for $1,525,000.

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Definitions:

Elastic Bandage

A stretchable bandage used to create localized pressure, commonly utilized to reduce swelling and support injured joints or muscles.

Severe Strain

A significant or extensive injury to a muscle or tendon, caused by overstretching or tearing.

Swelling

An increase in size or volume of a body part, typically resulting from inflammation or accumulation of fluid.

Wound Dressing

The application of materials (such as bandages, gauze, or plasters) to a wound to protect it from infection, absorb discharge, and promote healing.