On January 1, 2013, Harrison Corporation spent $2,600,000 to acquire control over Involved, Inc. This price was based on paying $750,000 for 30 percent of Involved's preferred stock, and $1,850,000 for 80 percent of its outstanding common stock. As of the date of the acquisition, Involved's stockholders' equity accounts were as follows: Assuming Involved's accounts are correctly valued within the company's financial statements, what amount of goodwill should be recognized for the Investment in Involved?
A) $(100,000.)
B) $0.
C) $200,000.
D) $812,500.
E) $2,112,500.

Question

On January 1, 2013, Harrison Corporation spent $2,600,000 to acquire control over Involved, Inc. This price was based on paying $750,000 for 30 percent of Involved's preferred stock, and $1,850,000 for 80 percent of its outstanding common stock. As of the date of the acquisition, Involved's stockholders' equity accounts were as follows:  Assuming Involved's accounts are correctly valued within the company's financial statements, what amount of goodwill should be recognized for the Investment in Involved?
A) $(100,000.) 
B) $0. 
C) $200,000. 
D) $812,500. 
E) $2,112,500.

Quizplus · Accepted Answer

Common Stock Non-Controlling Interest at Acquisition = $1,850,000/.80 = $2,312,500 × .20 = $462,500Preferred Stock Non-Controlling Interest at Acquisition = $750,000/.30 = $2,500,000 × .70 = $1,750,000(CS Parent $1,850,000) + (CS NCI $462,500) + (PS Parent $750,000) + (PS NCI $1,750,000) = $4,812,500 FV of Sub at AcquisitionFV $4,812,500 - BV $4,000,000 = $812,500 Goodwill

On January 1, 2013, Harrison Corporation Spent $2,600,000 to Acquire