Snowflake Corp -Based on the Information Concerning Snowflake Corp

question 51

Multiple Choice

Snowflake Corp.
Penguin, Inc.acquires 100% of the outstanding shares of Snowflake Corp.for $2,250,000 and accounts for the transaction using the purchase method.Snowflake's balance sheet at the acquisition date is as follows:

Snowflake, Corp.
Balance Sheet
Acquisition Date
$\begin{array}{lrr} & \begin{array}{r}\text { Historical } \\ \text { Cost }\end{array} & \begin{array}{r}\text { Current } \\ \text { Market } \\ \text { Value }\end{array} \\ \text { Assets } & \$ 900,000 & \$ 900,000 \\ \text { Current Assets } & \$ 875,000 & \$ 1,250,000 \\ \text { Depreciable Assets less Accumulated Depreciation } & & \\ \text { Goodwill } & \$ 1,775,000 & \\ \text { Total Assets } & & \\ \text { Liabilities and Equities } & & \\ \text { Liabilities } & \$ 1,100,000 & \$ 1,100,000 \\ \text { Deferred Income Tax Liability } & \$ 125,000 & \$ 125,000 \\ \text { Shareholders' Equity } & \$ 550,000 & \\ \text { Total Liabilities and Equities } & \$ 1,775,000 & \end{array}$


-Based on the information concerning Snowflake Corp.what is the market value of the company's shareholders' equity at the acquisition date?

• A) $1,775,000
• B) $475,000
• C) $2,250,000
• D) $0

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Definitions:

Expanded Sharply

Refers to rapid and significant growth or increase in a particular area, such as business, economy, or a specific sector.

Non-Cash Benefits

Forms of compensation provided to employees or beneficiaries that are not paid out in cash, such as health insurance, pension contributions, and food assistance.

In-Kind Benefits

Non-cash goods or services provided to beneficiaries, such as food stamps, housing, and healthcare, aimed to aid those in economic need.

Poverty Rate

The ratio of the number of people whose income falls below the poverty line; usually taken as a percentage of the population in a given country or region.