Assume that bullen issued 12,000 shares of common stock with a $5 par value and a $47 fair value for all of the outstanding shares of vicker. what will be the consolidated additional paid-in capital and retained earnings (january 1, 2018 balances) as a result of this acquisition transaction?
Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $47 fair value for all of the outstanding shares of Vicker.
The consolidated Additional Paid-In Capital and Retained Earnings (January 1, 2018 balances) as a result of this acquisition transaction will be:
Dr. Cash (12000 shares x $47)$564,000
Cr. Common Stock (12,000 shares x $5)$60,000
Cr. Additional Paid-In Capital [(12,000 shares x ($47-$5)].$504,000
Being issue of common of $5 per share at the price of $47 per share
c. $524,000 and $250,000
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The correct option is C, additional paid-in capital of $524000 and retained earnings of $250000
Bullen additional paid-in capital before business combination was $20000
Upon issuing new stocks, the additional paid-in capital will increase by the below:
Fair value-face value *number of shares issued
The new additional paid-in capital =$20000+$504000
This is just share transaction and does impact retained earnings in any way,hence retained earnings stay the same at $250000
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