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Pinehollow Acquired All of the Outstanding Stock of Stonebriar by Issuing

Question 33

Multiple Choice

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:
 Assets  Pinehollow  Stonebriar  Cash $150,000$50,000 Accounts receivable 500,000350,000 Inventory 900,000600,000 Property, plant, and equipment (net)  1,850,000900,000 Total assets $3,400,000$1,900,000 Liabilities and Stockholders’ Equity  Current liabilities $300,000$100,000 Bonds payable 1,000,000600,000 Common stock ( $1 par)  300,000100,000 Paid-in capital in excess of par 800,000900,000 Retained earnings 1,000,000200,000 Total liabilities and equity $3,400,000$1,900,000\begin{array}{lrr}\text { Assets } &\text { Pinehollow } & \text { Stonebriar }\\\text { Cash } & \$ 150,000 & \$ 50,000 \\\text { Accounts receivable } & 500,000 & 350,000 \\\text { Inventory } & 900,000 & 600,000 \\\text { Property, plant, and equipment (net) } & \underline{1,850,000} & 900,000 \\\text { Total assets } & \$ 3,400,000 & \$ 1,900,000\\\\\text { Liabilities and Stockholders' Equity }\\ \text { Current liabilities } & \$ 300,000 & \$ 100,000 \\\text { Bonds payable } & 1,000,000 & 600,000 \\\text { Common stock ( } \$ 1 \text { par) } & 300,000 & 100,000 \\\text { Paid-in capital in excess of par } & 800,000 & 900,000 \\\text { Retained earnings } & \underline{1,000,000} & \underline{200,000} \\\text { Total liabilities and equity } & \$ 3,400,000 & \$ 1,900,000\end{array}

The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.What is the amount of property, plant and equipment that will be included in the consolidated balance sheet immediately after the acquisition?


A) $2,570,000
B) $2,750,000
C) $2,850,000
D) $2,650,000

Correct Answer:

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