Balance Sheet Information for Hope Corporation at January 1, 2013

question 9

Essay

Balance sheet information for Hope Corporation at January 1, 2013, is summarized as follows: $\begin{array}{lrlr}\text { Current assets } & \$ 920,000 & \text { Liabilities } & \$ 1,200,000 \\\text { Plant assets } & 1,800,000 & \text { Capital stock } \$ 10 \text { par } & 800,000 \\& & \text { Retained earnings } & 720,000 \\&\$2,720,000&&\$2,720,000\end{array}$
Hope's assets and liabilities are fairly valued except for plant assets that are undervalued by $200,000.On January 2, 2013, Robin Corporation issues 80,000 shares of its $10 par value common stock for all of Hope's net assets and Hope is dissolved.Market quotations for the two stocks on this date are: Robin common: $\$ 28$
Hope common: $\$ 19$
Robin pays the following fees and costs in connection with the combination: $$\begin{array} { l r } \text { Finder's fee } & \$ 10,000 \\\text { Costs of registering and issuing stock } & 5,000 \\\text { Legal and accounting fees } & 6,000\end{array}$$
Required:
A.Calculate Robin's investment cost of Hope Corporation.
B.Calculate any goodwill from the business combination.

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Definitions:

Diethyl Acetal

A volatile, colorless liquid used as a solvent and as an intermediate in organic synthesis, formed from ethanol and acetaldehyde.

Butanal

An aldehyde with the formula C4H8O, characterized by a four-carbon chain terminated by a carbonyl group.

PCC

Pyridinium chlorochromate, a reagent used in organic chemistry for the oxidation of primary alcohols to aldehydes and secondary alcohols to ketones, maintaining the carbon skeleton.

LiCu

Lithium cuprate, a compound used in organic synthesis for coupling reactions.