Question
On January 1, Year One, Parent Company acquires 100 percent of the outstanding shares of Kid Company by issuing its own stock worth $12 million.
On January 1, Year One, Parent Company acquires 100 percent of the outstanding shares of Kid Company by issuing its own stock worth $12 million. The shares of Kid had been worth only $11 million in the period leading up to the acquisition but Parent had to pay a premium in order to obtain all of the stock. Parent paid an additional $200,000 in cash to attorneys as direct consolidation costs and another $150,000 in stock issuance costs. According to US GAAP, what should be the basis for reporting the assets and liabilities of Kid within consolidated financial statements created on the date of acquisition?
A) $11,350,000
B) $12,000,000
C) $12,200,000
D) $12,350,000
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