On January 1, 2018, 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 liabilities 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 Osorio
Cash $ 180 $ 40
Receivables 810 180
Inventories 1,080 280
Land 600 360
Buildings (net) 1,260 440
Equipment (net) 480 100
Accounts payable (450 ) (80 )
Long-term liabilities (1,290 ) (400 )
Common stock ($1 par) (330 )
Common stock ($20 par) (240 )
Additional paid-in capital (1,080 ) (340 )
Retained earnings (1,260 ) (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. 9) what amount was recorded as goodwill arising from this acquisition?
a. $230.
b. $120.
c. 520.
d. None, there is an gain on bargain purchase of $230.
e. None. there is a gain on bargain purchase of $265.