Question

Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $47 fair value for all of the outstanding shares of Vicker. What will be the consolidated Additional Paid-In Capital and Retained Earnings (January 1, 2018 balances) as a result of this acquisition transaction?a. $524,000 and $420,000.b. $60,000 and $250,000.c. $524,000 and $250,000.d. $60,000 and $490,000.e. $380,000 and $250,000.

Answer 1

Answer:

c. $524,000 and $250,000

Explanation:

See the attached picture for detailed explanation.

Answer 2

Answer:

The question is missing the details in the attached.

The correct option is C, additional paid-in capital of $524000 and retained earnings of $250000

Explanation:

Bullen additional paid-in capital before business combination was $20000

Upon issuing new stocks, the additional paid-in capital will increase by the below:

Fair value-face value *number of shares issued

($47-$5)*12000=$504000

The new additional paid-in capital =$20000+$504000

                                                          =$524000

This is just share transaction and does impact retained earnings in any way,hence retained earnings stay the same at $250000