5 points Save Answer s Company issued 24.000 shares of its $20 par value common

Question

5 points Save Answer s Company issued 24.000 shares of its $20 par value common stock for the net assets of p Company in business combination under which P Company will be merged into s Company. On the date of the combinat ion. S Company's e sheets for North Company and Prairie Company immediately prior to the combination were as follows: North Prairie S 1,314,000 S 192,000 1.725,000 408,000 Current Assets Plant and Equipment (net) Total $3039000 600,000 $150,000 1,650,000240,000 60,000 271,000 150,000 S3.039.000 $600.000 Liabilities $ 900,000 Common Stock, $20 par value Other Contributed Capital Retained Earnings Total 218,000 If the business combination is treated as an acquisition and the fair value of P Company's current assets is $280.000, its plant and equipment is $726,000, and its liablities are $168.000, s Companý's financial statements immediately after the combination will include: O A. An ordinary gain of $118,000 O B. An ordinary gain of $108,000. C, Negative goodwill of $118,000. D. Plant and equipment of $2,133,000.

Explanation / Answer

Considering all the fair values

24000*30per share = $720000 (Value being paid by S)

Net assets of P = $838000 ($280000+726000-168000)

Ordinary gain to be reported in S's financial statements ($720000-$838000)$108000 post combination

Option B is correct

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