Question

North Company issued 24,000 shares of its $20 par value common stock for the net assets of Prairie Company in business combination under which Prairie Company will be merged into North Company. On the date of the combination, North Company common stock had a fair value of $30 per share. Balance sheets for North Company and Prairie Company immediately prior to the combination were as follows: If the business combination is treated as an acquisition and Prairie Company’s net assets have a fair value of $686,400, North Company’s balance sheet immediately after the combination will include goodwill of:_______.

Answer 1

$33,600

Step-by-step explanation:

Data provided in the question;

Shares issued = 24,000

Par value common stock = $20

Fair value of common stock = $30 per share

Fair value of Prairie Company’s net assets = $686,400

Now,

The fair value of the shares North Company

= shares issued × Fair value of common stock

= 24,000 × $30

= $720,000

Therefore,

Goodwill of the North Company = $720,000 - $686,400

= $33,600