Snowflake Corp -Based on the Information Concerning Snowflake Corp

question 51

Multiple Choice

Snowflake Corp.
Penguin, Inc.acquires 100% of the outstanding shares of Snowflake Corp.for $2,250,000 and accounts for the transaction using the purchase method.Snowflake's balance sheet at the acquisition date is as follows:

Snowflake, Corp.
Balance Sheet
Acquisition Date
$\begin{array}{lrr} & \begin{array}{r}\text { Historical } \\ \text { Cost }\end{array} & \begin{array}{r}\text { Current } \\ \text { Market } \\ \text { Value }\end{array} \\ \text { Assets } & \$ 900,000 & \$ 900,000 \\ \text { Current Assets } & \$ 875,000 & \$ 1,250,000 \\ \text { Depreciable Assets less Accumulated Depreciation } & & \\ \text { Goodwill } & \$ 1,775,000 & \\ \text { Total Assets } & & \\ \text { Liabilities and Equities } & & \\ \text { Liabilities } & \$ 1,100,000 & \$ 1,100,000 \\ \text { Deferred Income Tax Liability } & \$ 125,000 & \$ 125,000 \\ \text { Shareholders' Equity } & \$ 550,000 & \\ \text { Total Liabilities and Equities } & \$ 1,775,000 & \end{array}$


-Based on the information concerning Snowflake Corp.what is the market value of the company's shareholders' equity at the acquisition date?

• A) $1,775,000
• B) $475,000
• C) $2,250,000
• D) $0

---

Definitions:

Associative Linkage

The connection or relation between two concepts or mental processes, allowing for one to trigger the recall of the other.

Extinction

The gradual weakening and eventual disappearance of a conditioned response when the reinforcement is no longer presented.

Conditioned Stimulus

A stimulus that initially has no inherent significance but acquires the ability to evoke a response after being associated with an unconditioned stimulus.

Stimulus Discrimination

The ability to distinguish between one particular stimulus and similar stimuli, not responding the same way to variations of the original stimulus.