Scenario 2-1
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets:
The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.
-Refer to Scenario 2-1. The journal entry to record the purchase of Stonebriar would include a
A) credit to common stock for $1,500,000.
B) credit to additional paid-in capital for $1,100,000.
C) debit to investment for $1,500,000.
D) debit to investment for $1,525,000.

Question

Scenario 2-1
Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock. The shares have a fair value of $15 per share. Pinehollow also paid $25,000 in direct acquisition costs. Prior to the transaction, the companies have the following balance sheets:
  The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.
-Refer to Scenario 2-1. The journal entry to record the purchase of Stonebriar would include a
A) credit to common stock for $1,500,000. 
B) credit to additional paid-in capital for $1,100,000. 
C) debit to investment for $1,500,000. 
D) debit to investment for $1,525,000.

Quizplus · Accepted Answer

The purchase of Stonebriar would be recorded as a debit to investment for the purchase price of $1,500,000.

Scenario 2-1 Pinehollow Acquired All of the Outstanding Stock of Stonebriar by Stonebriar