5. On July 1, Year S, Harrison, Inc, had the following summarized balance sheet

Question

5. On July 1, Year S, Harrison, Inc, had the following summarized balance sheet with the book values and fair values shown: $ 40,000 80,000 80,000 40,000 Accounts Receivable (net) Inventories Plant and Equipment (net) Land TOTAL ASSETS 160,000 200,000 120.000 160.002 400,000 $480,000 Accounts Payable Short-term Note Bonds Payable TOTAL LIABILITIES s 20,000 20,000 30,000 30,000 Z0.000 20.000 $120,000 $120,000 On that date, New Market, Inc. acquired 100% of Harrison's voting stock from its shareholders by paying the following consideration: Cash 10,000 newly-issued shares of New Market's $10 par common stock $225,000 100,000 (par) Prior to the combination, New Market had 1,000,000 shares of voting stock outstanding trading in an active market at $15 per share. New Market paid $25,000 for legal and accounting fees to carry out the combination. Which one of the following is the amount of goodwill or bargain purchase gai Market should recognize as a result of its acquisition of Harrison? n that New Goodwill Bargain Purchase Gain A. $10,000 B. $15,000 C. $-0 10,000 $60,000

Explanation / Answer

net assets = 480000 - 120000 = 360000

net purchase consideration = 225000 + 150000 = 375000

good will = 375000 - 360000

therefore option B is correct.

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