On January 1, 2013, Harrison Corporation Spent $2,600,000 to Acquire

question 12

Multiple Choice

On January 1, 2013, Harrison Corporation spent $2,600,000 to acquire control over Involved, Inc. This price was based on paying $750,000 for 30 percent of Involved's preferred stock, and $1,850,000 for 80 percent of its outstanding common stock. As of the date of the acquisition, Involved's stockholders' equity accounts were as follows: $\begin{array}{|l|r|}\hline \text { Common stock, } \$ 10 \text { par value, } 100,000 \text { shares outstanding } & \$ 1,000,000 \\\hline \text { Preferred stock, } 7 \% \text { fully participating, } \$ 100 \text { par value, } & \\\hline 10,000 \text { shares outstanding } & 1,000,000 \\\hline \text { Retained Earnings } & 2,000,000 \\\hline \text { Total stockholders' equity } & \$ 4,000,000 \\\hline\end{array}$ 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:

Experimental Group

In research, the group of participants who are exposed to the independent variable to assess its effect on a dependent variable, contrasted with a control group.

P-value

A statistical measure that helps scientists and researchers determine the significance of their experiment's results, indicating the probability of observing the results by chance.

Statistical Significance

A calculation central to inferential statistics that describes the likelihood that the results of a study happened by chance.

Experimental Manipulation

The controlled alteration of an independent variable in an experiment to assess its effects on a dependent variable.