Question
Answer is given. Please explain how it is calculated. Luckys Company acquires Waterview, Inc., by issuing 40,000 shares of $1 par common stock with a
Answer is given. Please explain how it is calculated.
Luckys Company acquires Waterview, Inc., by issuing 40,000 shares of $1 par common stock with a market price of $25 per share on the acquisition date and paying $125,000 cash. The assets and liabilities on Waterviews balance sheet were valued at fair values except equipment that was undervalued by $300,000. There was also an unrecorded patent valued at $40,000, as well as an unrecorded trademark valued at $75,000. In addition, the agreement provided for additional consideration, valued at $60,000, if certain earnings targets were met.
The pre-acquisition balance sheets for the two companies at acquisition date are presented below.
| Luckys Company | Waterview, Inc. |
Cash | $300,000 | $260,000 |
Accounts receivable | 250,000 | 135,000 |
Inventory | 254,000 | 275,000 |
Property, plant, and equipment | 2,300,000 | 356,500 |
| $3,104,000 | $1,026,500 |
|
|
|
Accounts payable | $45,000 | $37,500 |
Salaries and taxes payable | 450,000 | 46,000 |
Notes payable | 500,000 | 450,000 |
Common stock | 250,000 | 60,000 |
Additional paid-in capital | 950,000 | 106,500 |
Retained earnings | 909,000 | 326,500 |
| $3,104,000 | $1,026,500 |
1) Compute consolidated additional paid-in capital.
Answer = 1,910,000
How was 1,910,000 calculated?
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