# Question: On January 1 Morgan Company has a net book value

On January 1, Morgan Company has a net book value of \$1,460,000 as follows:
1,000 shares of preferred stock; par value \$100 per share; cumulative,
nonparticipating, nonvoting; call value \$108 per share . . . . . . . . . \$ 100,000
20,000 shares of common stock; par value \$40 per share . . . . . . . . . 800,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$1,460,000
Leinen Company acquires all outstanding preferred shares for \$106,000 and 60 percent of the common stock for \$870,000. The acquisition-date fair value of the noncontrolling interest in Morgan’s common stock was \$580,000. Leinen believed that one of Morgan’s buildings, with a 12-year life, was undervalued by \$50,000 on the company’s financial records.
What amount of consolidated goodwill would be recognized from this acquisition?
a. \$40,000.
b. \$41,200.
c. \$42,400.
d. \$46,000.

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