On October 1,20X3,Pole Corporation paid $450,000 for all of Stick Company's outstanding common stock.On that date,the book values and fair values of Stick's recorded assets and liabilities were as follows:

-Based on the preceding information,the differential implicit in this acquisition is
A)$0.
B)$45,000.
C)$65,000.
D)$110,000.

Question

On October 1,20X3,Pole Corporation paid $450,000 for all of Stick Company's outstanding common stock.On that date,the book values and fair values of Stick's recorded assets and liabilities were as follows:
 
-Based on the preceding information,the differential implicit in this acquisition is
A)$0. 
B)$45,000. 
C)$65,000. 
D)$110,000.

Quizplus · Accepted Answer

To calculate the differential implicit in the acquisition, we need to find the difference between the total purchase price paid by Pole Corporation and the fair value of Stick Company's assets and liabilities.

Total Purchase Price = $450,000

Fair Values of Stick Company's Assets and Liabilities: 
- Current Assets = $160,000 
- Property, Plant and Equipment = $410,000 
- Liabilities = $285,000

Fair Value of Stick Company = $160,000 + $410,000 - $285,000 = $285,000

Differential Implicit in the Acquisition = Total Purchase Price - Fair Value of Stick Company 
= $450,000 - $285,000 
= $165,000

Therefore, the best choice is D, which represents the differential implicit in the acquisition as $110,000.

On October 1,20X3,Pole Corporation Paid $450,000 for All of Stick