Reference no: EM132511171

Pacific Inc. acquires all of the voting stock of Skye Company for $300 million in cash. Skye's balance sheet at the date of acquisition is as follows (in millions):

Skye Company

Assets

Liabilities & equity

Current assets                              $ 75

Current liabilities                             $ 80

Land, buildings & equipment, net       1,200

Long-term liabilities                        1,500

Capital stock                                   100

Retained deficit                                 (400)

Accumulated other comprehensive income   10

Treasury stock                                        (15)

Total assets                                       $1,275

Total liabilities & equity                        $1,275

• Skye's land, buildings & equipment have a fair value of $1,000 million. Skye's other assets and liabilities are reported at amounts that approximate fair value. Skye has unreported identifiable intangibles with a fair value of $100 million that meet the criteria for capitalization.

Question 1: Now assume Skye elects to use pushdown accounting at the date of acquisition. What is its credit to Pushdown Capital, on its own books?

A. $215 million

B. $415 million

C. $605 million

D. $205 millio