The answer to the question is B, $50,000 (according to the solutions manual). My question is why is Pop's investment cost of $1,400,000 being added to the underlying book value of Son's net assets to find the amount of goodwill?

According to my textbook, the cost of investment minus the underlying book value is equal to the amount that is assigned to goodwill. So I got, cost of investment of $1,400,000 minus ( 25% interest acquired x Stockholder's equity of 4,000,000) = 1,400,000 - 1,000,000 = 400,000 assigned to goodwill.

Son's Corporation's stockholders' equity at Dec 31, 2016, follows (in thousands):

Capital stock	3,000
Additional paid in capital	500
Retained earnings	500
Total stockholders' equity	4,000

On January 3, 2017, Son sells 10,000 shares of previously UNISSUED $100 par common stock to Pop Corporation for $1,400,000. On this date the recorded book values of Son's assets and liabilities equal fair values. Goodwill from Pop's investment in Son at the date of purchase is:

a.) $0 b.) 50,000 c.) 300,000 d.) 400,000

This is the answer:

	Cost of 10,000 of 40,000 shares outstanding	$1,400,000
	Book value of 25% interest acquired ($4,000,000 stockholders equity at December 31, 2016 + $1,400,000 from additional stock issuance) 25%	1,350,000
	Excess fair value over book value(goodwill)	$ 50,000