Question
Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2013. To obtain these shares, Flynn pays $400 cash (in
Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2013. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000 shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 2013 follow. The fair value of each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any related question also is in thousands.
flynn inc macek co.
book value fair value
cash 900 80 80
receivable 480 180 180
inventory 660 260 300
land 300 120 130
buildings 1,200 220 280
equipment 360 100 75
A/P 480 60 60
Long term
liabilities 1,140 340 300
common stock 1,000 80
additional paid
in capital 200 0
retained earning 1,080 480
By how much will Flynns additional paid-in capital increase as a result of this acquisition?
A) $150,000.
B) $160,000.
C) $230,000.
D) $350,000.
E) $360,000.
What amount will be reported for goodwill as a result of this acquisition?
A) $ 30,000.
B) $ 55,000.
C) $ 65,000.
D) $175,000.
E) $ 200,000.
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