On January 1, 2021, Harrison Corporation Spent $2,600,000 to Acquire

question 97

Multiple Choice

On January 1, 2021, Harrison Corporation spent $2,600,000 to acquire control over Involved, Inc. This price was based on paying $750,000 for 30% of Involved's preferred stock, and $1,850,000 for 80% of its outstanding common stock. As of the date of the acquisition, Involved's stockholders' equity accounts were as follows: Assuming Involved's accounts are correctly valued within the company's financial statements, what amount of goodwill should be recognized for the Investment in Involved?

• A) $(100,000.)
• B) $0.
• C) $200,000.
• D) $812,500.
• E) $2,112,500.

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Definitions:

Factory Payroll

The total compensation paid to employees working within a manufacturing setting, including wages, salaries, and benefits.

Direct Labor

The wages and related costs of employees who are directly involved in the production of goods or services.

Direct Materials Cost

The cost of raw materials that can be directly traced to the production of goods, excluding indirect materials like maintenance supplies.

Finished Goods Inventory

Finished products awaiting sale but still not purchased.