Amie Inc has 100,000 shares of $2 par value stock outstanding. Prairie Corporati

Question

Amie Inc has 100,000 shares of $2 par value stock outstanding. Prairie Corporation acquired 30,000 of Amie's Shares on January 1 2012, for $120,000 when Amie's net assets had a total fair value of $350,000. On July 1st, 2015, Prairie bought an additional 60,000 shares of Amie from a single stockholder for $6 per share. Although Amie's shares were selling in the $5 range around July 1 2015, Prairie forcasted that obtaining control of Amie would produce significant revenue synergies to justify the premium price paid. If Amie's net identifiable assets had a fair value of $500,000 at july 1 2015, how much goodwill should Prairie report in its post combination consolidated balance sheet?

a. $60,000

b. $90,000

c. 100,000

d. -0-

Explanation / Answer

The Goodwill should be

Purcahse Price 360000( 60000*6)

Less: Fair value of net assets 300000( 60000*5)

Goodwill $ 60000

The correct option is

a. $ 60000

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