Use the Following Information to Answer the Question(s) Below

question 14

Multiple Choice

Use the following information to answer the question(s) below.

On January 1, 2014, Pamplin Corporation's stockholders' equity consisted of $1,000,000 of $10 par value Common Stock, $750,000 of Additional Paid-in Capital, and $3,000,000 of Retained Earnings. On January 1, 2014, Pamplin purchased 90% of the outstanding common stock of Sage Corporation for $1,500,000 with all excess purchase cost assigned to goodwill. The stockholders' equity of Sage on this date consisted of $800,000 of $100 par value, 8% cumulative, preferred stock callable at $105, $900,000 of $10 par value common stock and $500,000 of Retained Earnings. Sage's net income for 2014 was $100,000.

On January 1, 2014, no preferred dividends are in arrears. No dividends are declared or paid in 2014. In a separate transaction on January 1, 2014, Pamplin purchased 70% of Sage's preferred stock for $600,000.

-What is the goodwill on the consolidated balance sheet for Pamplin and Subsidiaries on December 31,2014 based on Pamplin's purchase of Sage's common stock?

• A)$140,000
• B)$240,000
• C)$290,000
• D)$306,667

---

Definitions:

Sickle Cell Anemia

A genetic blood disorder characterized by the production of abnormal hemoglobin, resulting in red blood cells that assume a sickle shape, leading to various health complications.

African Americans

A demographic group in the United States with ancestry from any of the black racial groups of Africa.

Platelet Plug Formation

A critical step in the blood clotting process where platelets aggregate at the site of a blood vessel injury to prevent excessive bleeding.

Vasodilation

The widening of the muscular wall of an artery to decrease blood pressure.