On December 31, 20X8, Mercury Corporation acquired 100 percent ownership of Saturn Corporation. On that date, Saturn reported assets and liabilities with book values of $300,000 and $100,000, respectively, common stock outstanding of $50,000, and retained earnings of $150,000. The book values and fair values of Saturn's assets and liabilities were identical except for land which had increased in value by $10,000 and inventories which had decreased by $5,000.

1. Based on the preceding information, what amount of differential will appear in the consolidating entries required to prepare a consolidated balance sheet immediately after the business combination, if the acquisition price was $240,000?

a. 0

b. 40,000

c. 25,000

d. 5,000

2. Based on the preceding information, what amount of goodwill will be reported if the acquisition price was $240,000?

a. 0

b. 40,000

c. 15,000

d. 35,000

3. Based on the preceding information, what amount of goodwill will be reported if the acquisition price was $195,000?

a. 0

b. 40,000

c. 15,000

d. 35,000