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Pinehollow Acquired All of the Outstanding Stock of Stonebriar by Issuing

question 37

Multiple Choice

Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock.The shares have a fair value of $15 per share.Pinehollow also paid $25,000 in direct acquisition costs.Prior to the transaction, the companies have the following balance sheets:
$\begin{array}{lrr}\text { Assets } &\text { Pinehollow } & \text { Stonebriar }\\\text { Cash } & \$ 150,000 & \$ 50,000 \\\text { Accounts receivable } & 500,000 & 350,000 \\\text { Inventory } & 900,000 & 600,000 \\\text { Property, plant, and equipment (net) } & \underline{1,850,000} & 900,000 \\\text { Total assets } & \$ 3,400,000 & \$ 1,900,000\\\\\text { Liabilities and Stockholders' Equity }\\ \text { Current liabilities } & \$ 300,000 & \$ 100,000 \\\text { Bonds payable } & 1,000,000 & 600,000 \\\text { Common stock ( } \$ 1 \text { par) } & 300,000 & 100,000 \\\text { Paid-in capital in excess of par } & 800,000 & 900,000 \\\text { Retained earnings } & \underline{1,000,000} & \underline{200,000} \\\text { Total liabilities and equity } & \$ 3,400,000 & \$ 1,900,000\end{array}$
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.What is the amount of goodwill that will be included in the consolidated balance sheet immediately following the acquisition?

Definitions:

Dependent Variable

The factor in an experiment that is predicted to vary following changes made to the independent variable.

Independent Variable

In experimental and research settings, the variable that is manipulated or changed to observe its effects on the dependent variable.

Final Exam

A comprehensive test covering material from an entire course, usually administered at the end of an academic term.

Control Group

In experimental research, a group of subjects that does not receive the experimental treatment or intervention, serving as a baseline to compare effects.