Seashell Corp. was organized to consolidate Sea Company and Shell Company in a business combination. Seashell issued 25,000 shares of its newly authorized $10 par value common stock in exchange for all of the outstanding common stock of Sea and Shell. At the time of the consolidation, the fair value of Sea's and Shell's assets and liabilities are equal to their book values. The shareholders' equity accounts of Sea and Shell on the date of the consolidation were:

	Sea	Shell	Total
Common stock, at par	$100,000	$200,000	$300,000
Additional paid-in capital	50,000	75,000	125,000
Retained Earnings	22,500	47,500	70,000
Totals	$172,500	$322,500	$495,000

Which one of the following is the amount of goodwill Seashell would recognize upon issuing its common stock to effect the consolidation?

	$-0-
	$50,000
	$195,000
	$245,000

You Answered Correctly! (Answer is A, $0)

Explanation:

Since Seashell's stock is newly issued to effect the consolidation, it has no prior market value. In the absence of a market value, the fair value of Seashell's stock is determined by the fair value of the net assets acquired in the consolidation. Therefore, the consideration given (common stock issued) is equal to the fair value of net assets acquired, and no goodwill is recognized

For this problem what would be "the fair value of the net assets acquired in the consolidation" as stated in the answer explanation above? Also, please explain as simple as possible why goodwill is not recognized because I still can't seem to understand why it isn't with the explanation above?