Determining if a True Loss Occurred On 1/1/06, Pyco Company acquired 100% of Syco Com¬
pany (which was privately owned) for $50 million of consideration when Pyco’s common stock had a fair value of $50 per share. Immediately before the combination, Pyco had (1) total stock¬
holders equity of $20 million and (2) 3,000,000 common shares outstanding.
Of the $50 million purchase price, $40 million was assigned to goodwill. None of Syco’s recorded assets or liabilities were over- or undervalued on 1/1/06.
On 12/31/07 (two years later), Pyco wrote off the entire $40 million of goodwill as a result of performing an impairment review. At that time, Pyco’s common stock had a fair value of $5 per share.
Determine how much investors gained or lost under each of the following four scenarios.

a. Pyco used $50 million of cash that it had accumulated to acquire Syco.

b. Pyco borrowed $50 million cash from a bank to acquire Syco.

c. Pyco issued $50 million of common stock (1,000,000 shares) to the public to obtain cash to ac¬
quire Syco.

d. Pyco issued $50 million of common stock (1,000,000 shares) to Syco’s stockholders to acquire Syco.