On January 1, 2011, Harrison Corporation Spent $2,600,000 to Acquire

question 49

Multiple Choice

On January 1, 2011, 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:

What is the total acquisition-date fair value of Involved?

• A) $2,600,000
• B) $4,812,500
• C) $3,062,500
• D) $2,312,500
• E) $3,250,000

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Definitions:

Strike Price

The specified price at which an option contract can be exercised to buy or sell the underlying asset.

Call Option

A financial contract granting the buyer the right, but not the obligation, to purchase a stock, bond, commodity, or other asset at a specified price within a specific time period.

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specified price within a specific time period.

Specified Price

The fixed price at which a transaction is agreed upon between a buyer and a seller.