On December 31 of the current year, Sam Company was merged into Paul Company. In carrying out the business combination, Paul Company issued 60,000 shares of its $10 par value common stock, with a fair value of $15 per share, for all of Sam Company's outstanding common stock. The stockholders' equity section of the two companies immediately before the business combination was:

Paul Company:

Common Stock: $500,000

Additional Paid-In Capital: $200,000

Retained Earnings: $300,000

Sam Company:

Common Stock: $400,000

Additional Paid-In Capital: $100,000

Retained Earnings: $200,000

Assume that the transaction is accounted for using the acquisition method. In the consolidated balance sheet at the end of the next year, the Additional Paid-In Capital account should be reported at:

A) $400,000

B) $300,000

C) $500,000

D) $200,000

E $100,000

I know the answer is $500,000 but I don't know how or why that is...please help!

THanks!