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:

Goods Y

A placeholder term often used in economics to refer to a specific category of goods under discussion or analysis, contrasting with another category labeled "Goods X".

Indifference Curves

Graphical representations in economics showing combinations of goods that give the consumer equal satisfaction and utility.

Utility Function

A utility function is a mathematical representation of a consumer’s preferences, ranking different bundles of goods according to levels of satisfaction.

Indifference Curve

A graph showing different bundles of goods between which a consumer is indifferent, meaning they would derive the same level of satisfaction from any combination.