Balance Sheet Information for Sphinx Company at January 1, 2011

question 8

Essay

Balance sheet information for Sphinx Company at January 1, 2011, is summarized as follows:
Sphinx's assets and liabilities are fairly valued except for plant assets that are undervalued by $50,000.On January 2, 2011, Pyramid Corporation issues 20,000 shares of its $10 par value common stock for all of Sphinx's net assets and Sphinx is dissolved.Market quotations for the two stocks on this date are:
Required:
1.Calculate Pyramid's investment cost of Sphinx Corporation.
2.Calculate any goodwill from the business combination.

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Definitions:

Median

The middle value in a dataset when it is arranged in ascending or descending order, or the average of the two middle values when the dataset has an even number of observations.

Interquartile Range

A measure of variability, calculated as the difference between the 25th and 75th percentiles of a data set.

Mean

The average value of a data set, calculated by summing all observations and dividing by the number of observations.

Median

The middle value in a dataset when the values are arranged in ascending or descending order, effectively splitting the dataset into two equal halves.