Use the following information to answer the question(s)below.
Goldberg Corporation owned a 70% interest in Savannah Corporation on December 31,2010,and Goldberg's Investment in Savannah account had a balance of $3,900,000.Savannah's stockholders' equity on this date was as follows:
On January 1,2011,Savannah issues 80,000 new shares of common stock to Goldberg for $16 each.
-On January 1,2011,assume the fair values of Savannah's identifiable assets and liabilities equal book values.What is the change in the amount of goodwill associated with the issuance of 80,000 additional shares to Goldberg? (Use four decimal places. )
A)Increase goodwill $38,176.
B)Decrease goodwill $38,176.
C)Increase goodwill $384,000.
D)Decrease goodwill $384,000.

Question

Use the following information to answer the question(s)below.
Goldberg Corporation owned a 70% interest in Savannah Corporation on December 31,2010,and Goldberg's Investment in Savannah account had a balance of $3,900,000.Savannah's stockholders' equity on this date was as follows:
  On January 1,2011,Savannah issues 80,000 new shares of common stock to Goldberg for $16 each.
-On January 1,2011,assume the fair values of Savannah's identifiable assets and liabilities equal book values.What is the change in the amount of goodwill associated with the issuance of 80,000 additional shares to Goldberg? (Use four decimal places. )
A)Increase goodwill $38,176. 
B)Decrease goodwill $38,176. 
C)Increase goodwill $384,000. 
D)Decrease goodwill $384,000.

Quizplus · Accepted Answer

B)
Savannah's equity after the issuance of
the new shares ($5,400,000 + $1,280,000)$6,680,000
Goldberg's ownership percentage 76.32%
Goldberg's share of Savannah's equity now $5,098,176
Goldberg's previous share of Savannah's equity ($5,400,000 × 70%)3,780,000
Savannah's equity acquired in the purchase $1,318,176
Amount spent to acquire stock 1,280,000
Excess book value acquired over cost $ 38,176

Use the Following Information to Answer the Question(s)below