Question
On January 1, 2011, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares,
On January 1, 2011, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows:
Moody | Osorio | |
Cash | $180 | $40 |
Receivables | 810 | 180 |
Inventories | 1,080 | 280 |
Land | 600 | 360 |
Buildings (net) | 1,260 | 440 |
Equipment (net) | 480 | 100 |
Accounts payable | (450) | (80) |
Long-term liabilities | (1,290) | (400) |
Common stock ($1 par) | (330) | |
Common stock ($20 par) | (240) | |
Additional paid-in capital | (1,080) | (340) |
Retained Earnings | (1,260) | (340) |
In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated additional paid-in capital at date of acquisition.
A. $1,080
B. $1,420
C. $1,065
D. $1,425
E. $1,440
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