Question

An acquiring company issues 800,000 shares of $1.00 par value common stock to acquire 100% of the voting common stock of an investee company in a transaction that qualifies as a business combination. The fair value of the acquiring company’s common stock is $10.00 per share. Direct legal and consult-ing fees incurred pursuant to the combination are $200,000. Direct registration and issuance costs for the acquiring company’s common stock are $100,000. The transaction did not result in goodwill recog-nition or bargain gain recognition. What is the total amount of net assets recognized as a result of this business combination?

Answer 1

Answer: $8,000,000

Explanation:

The Acquiring company issued stock that is value at $10.00 each to be able to acquire 100% of the Investee company.

The total amount of net assets will therefore be the fair value of the stock that was issued to acquire the Investee company.

Net Assets = 800,000 * 10

= $8,000,000