Suppose Parrot Mfg. purchases Clint Enterprises for $120 million in cash. For purposes of the acquisition, Clint's fixed assets were appraised at $95 million. Further, assume Clint Enterprises has working capital of $15 million and no long-term debt. If Parrot Mfg. uses the purchase accounting method to account for the acquisition, goodwill of ______________ is created.

A) $10 million
B) $15 million
C) $25 million
D) $35 million
E) $80 million

Purchase Accounting Method

An accounting method used in mergers and acquisitions to allocate the purchase price to the acquired assets and liabilities.

Fixed Assets

Tangible assets, such as buildings and machinery, used in the operation of a business and not expected to be consumed or converted into cash in the short term.

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its separable net assets.