Q.38

8 On January 1, 2021, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term Mabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock Issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Moody 5 180 810 1,080 11 600 Cash Receivables Inventories Land Buildinga (net) Equipment (net) Accounts payable Long-term liabilities Common stock ($1 par) Common stock ($20 par) Additional paid-in capital Retained earninga Osorio $ 40 180 280 360 440 100 (80) (400) 1,260 480 (450) (1,290) (330) (1,080) (1,260) (240) (340) (340) Note: Parentheses indicate a credit balance. In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60 What is the amount of goodwill arising from this acquisition? Multiple Choice What is the amount of goodwill arising from this acquisition? 3 Multiple Choice 2 $520 None. There is a gain on bargain purchase of $230. $120. $230. None. There is a gain on bargain purchase of $265