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

question 18

Multiple Choice

Use the following information to answer the question(s) below.
On January 1,2011,Pamplin Corporation 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 1,2011,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 2011 was $100,000.
On January 1,2011,no preferred dividends are in arrears.No dividends are declared or paid in 2011.In a separate transaction on January 1,2011,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 31,2011 based on Pamplin's purchase of Sage's common stock?

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

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Definitions:

Afford

To have enough money to pay for something or to have sufficient time or opportunity to do something.

Economic Recessions

Periods of temporary economic decline during which trade and industrial activity are reduced.

Postpone

To delay or put off an event, action, or decision to a later time.

Marriage

A legally or formally recognized union of two people as partners in a personal relationship, historically institutionally recognized as between a man and a woman.