Use the Following Information to Answer Questions

question 3

Multiple Choice

Use the following information to answer questions
North Company issued 24,000 shares of its $20 par value common stock for the net assets of Prairie Company in business combination under which Prairie Company will be merged into North Company.On the date of the combination, North Company common stock had a fair value of $30 per share.Balance sheets for North Company and Prairie Company immediately prior to the combination were as follows:
-If the business combination is treated as an acquisition and the fair value of Prairie Company's current assets is $270,000, its plant and equipment is $726,000, and its liabilities are $168,000, North Company's financial statements immediately after the combination will include

• A)Negative goodwill of $108,000.
• B)Plant and equipment of $2,133,000.
• C)Plant and equipment of $2,343,000.
• D)An ordinary gain of $108,000.

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Definitions:

Initial Cost

The purchase price of an asset or service, including installation, setup, and training, before any depreciation or amortization.

Required Return

The minimum amount of profit an investor expects to achieve on an investment, setting the threshold for decision-making on whether to undertake the investment.

Profitability Index

An instrument in finance for assessing the attractiveness of a project or investment, which is found by dividing the current value of forthcoming cash flows by the initial cost of the investment.

Present Value

The valuation in today's terms of a prospective future sum of money or cash inflows, utilizing a particular return rate.