Answer:
b. 800,000
Explanation:
Step 1; Calcualate Excess Valuation of Surge in Piani's Consolidated Balance Sheet
Surge's balance sheet as at November 30, 2013 showed a book value of $8,000,000
However, Piani Purchased 400,000 Shares of Surge's Outstanding Common Stock at $25 each. The total Cost therefore to Piani is
$25× 400,000= $10,000,000
The difference between Surge's book value and Piani's valuation of Surge is
Surge's value in Piani- Surge's book value
$10,000,000-$8,000,000= $2,000,000
Step 2: Calculate the Difference between the Excess Property Fair Value and the Step One Total to arrive at the Goodwill
Out of the $2,000,000; $1,200,000 represents the excess of the fair value of Surge's Property, Plant and Equipment on November 30, 2013.
The Goodwill Value Therefore is
The difference in Surge's Stock Valuation- Excess Fair Value of Surge's Property, Plant and Equipment
= $2,000,000-$1, 200,000
=$800,000
