Answered step by step
Verified Expert Solution
Question
1 Approved Answer
PART 2: Assume that Parent acquired all of the outstanding common stock of Subsidiary for $400,000 cash plus 1,000 shares of Parent's $50 par
PART 2: Assume that Parent acquired all of the outstanding common stock of Subsidiary for $400,000 cash plus 1,000 shares of Parent's $50 par value common stock having a market value of $56 per share. Also assume that stock registration fees were $5,000 and merger-related legal and consulting fees (i.e., expenses) were $25,000, all paid in cash by Parent. Further assume that Subsidiary was dissolved. REQUIRED: Calculate the change, if any, in Parent's Additional Paid-In Capital account using only the assumed information provided in this paragraph. No labels or account titles are required for this part (of the exam) only. (If no change occurred, indicate NO CHANGE OCCURRED.) NOTE: Pre-Acquisition data common to all parts is presented immediately below. Fair Book Book Value Value Value Trial Balance Accounts Parent Subsidiary Subsidiary Cash $6,000,000 $800,000 $800,000 Accounts Receivable 5,000,000 700,000 700,000 4,000,000 750,000 600,000 4,000,000 850,000 850,000 Plant Assets, net Accounts Payable Bonds Payable Common Stock 5,000,000 950,000 950,000 3,000,000 450,000* 100,000 Additional Paid-In Capital 2,000,000 N/A 150,000 Retained Earnings 1,000,000 N/A 50,000 *This amount represents the total/net fair value of Subsidiary (a.k.a., FMV-S). THUS use this amount when calculating Goodwill or Bargain Purchase Gain.
Step by Step Solution
★★★★★
3.56 Rating (146 Votes )
There are 3 Steps involved in it
Step: 1
Hote will calculation of purchase Cash 400000 shares ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started