Select the correct answer for each of the following questions.

1. On December 31. 20X3, Saxe Corporation was merged into Poe Corporation. In the business combination, Poe issued 200,000 shares of its $10 par common stock, with a market price of $18 a share, for all of Saxe's common stock. The stockholders"

Assume the merger qualifies for treatment as a purchase. In the December 31, 20X3, consolidated balance sheet, additional paid-in capital should be reported at:

a. $950,000.

b. $1,300,000.

c. $1,450,000.
d $2,900,000.
On January 1, 20X1, Rolan Corporation issued 10,000 shares of common stock in exchange for all Sandin Corporation's outstanding stock. Condensed balance sheets of Rolan and Sandin immediately before the combination are as follows:

Rolan's common stock had a market price of $60 per share on January 1, 20X1. The market price of Sandin's stock was not readily ascertainable.
Assuming that the combination of Rolan and Sandin qualifies as a purchase, Rolan's investment in Sandin's stock will be stated in Rolan's balance sheet immediately after the combination in the amount of:

a. $100,000.

b. $350,000.

c. $500,000.

d. $600,000.
3. On February 15, 20X1, Reed Corporation paid $1,500,000 for all the issued and outstanding common stock of Cord Inc. in a transaction properly accounted for as a purchase. The book values and fair values of Cord's assets and liabilities on February 15, 20X1, were as follows:

What is the amount of goodwill resulting from the business combination?

a. $0.

b. $70,000.

c. $280,000.

d. $350,000.
4. On April 1 , 2 0X2, the Jack Company paid $800,000 for all the issued and outstanding common stock of Ann Corporation in a transaction properly accounted for as a purchase. The recorded assets and liabilities of Ann Corporation on April 1, 20X2, were as follows:

On April 1 , 2 0X2, it was determined that the inventory of Ann had a fair value of $ 1 90,000 and that the property and equipment had a fair value of $560,000. What is the amount of goodwill resulting from the business combination?

a. $0.

b. $50,000.

c. $150,000.

d. $180,000.
5. The Action Corporation issued nonvoting preferred stock with a fair market value of $4,000,000 in exchange for all the outstanding common stock of Master Corporation. On the date of the exchange. Master had tangible net assets with a book value of $2,000,000 and a fair value of

$2,500,000. In addition. Action issued preferred stock valued at $400,000 to an individual as a finder's fee in arranging the transaction. As a result of this transaction. Action should record an increase in net assets of;

a. $2,000,000.

b. $2,500,000.

c. $2,900,000.

d. $4,400,000.

Transcribed Image Text:

Poe Saxe Common Stock $3.000.000 $1.500.000 Additional Paid-In Capital 1,300,000 150,000 Retained Earnings 2,500,000 850,000 $6,800,000 $2,500,000