Question

On January 1, 2018, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Moody Osorio Cash $ 180 $ 40 Receivables 810 180 Inventories 1,080 280 Land 600 360 Buildings (net) 1,260 440 Equipment (net) 480 100 Accounts payable (450 ) (80 ) Long-term liabilities (1,290 ) (400 ) Common stock ($1 par) (330 ) Common stock ($20 par) (240 ) Additional paid-in capital (1,080 ) (340 ) Retained earnings (1,260 ) (340 ) - Note: Parentheses indicate a credit balance. In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60. 9) what amount was recorded as goodwill arising from this acquisition? a. $230. b. $120. c. 520. d. None, there is an gain on bargain purchase of $230. e. None. there is a gain on bargain purchase of $265.

Answer 1