North Company Issued 24,000 Shares of Its $20 Par Value

question 42

Multiple Choice

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:

Indirect

In a manner or by means not directly explicit; involving an intermediary or secondary channel.

Direct

The process or manner of communication or transaction that happens without any intermediaries.

Channel Conflict

A situation where channels in a distribution chain are in competition with each other or interfere, leading to reduced efficiency or sales.

Vertical

An industry or market in which businesses provide products or services specific to a particular niche, focusing on a tightly defined area of operation.