Public Equity Corporation acquired Lenore Company through an exchange of common shares. All of Lenore's assets...
Public Equity Corporation acquired Lenore Company through an exchange of common shares. All of Lenore's assets and liabilities were immediately transferred to Public Equity. Public's common stock was trading at $20 per share at the time of exchange. Following selected information is also available.
|
Public Equity |
|||||||||
|
Before acquisition |
After acquisition |
||||||||
|
Par value of shares outstanding |
$ |
200,000 |
$ |
250,000 |
|||||
|
Additional paid-in capital |
$ |
350,000 |
$ |
550,000 |
|||||
34) Based on the preceding information, what number of shares was issued at the time of the exchange?
A) 5,000
B) 17,500
C) 12,500
D) 10,000
35) Based on the preceding information, what is the par value of Public's common stock?
A) $10
B) $1
C) $5
D) $4
36) Based on the preceding information, what is the fair value of Lenore's net assets, if goodwill of $56,000 is recorded?
A) $306,000
B) $244,000
C) $194,000
D) $300,000
Homework Answers
34. (c) $12,500
Explanation:
Addition in Stockholder's Equity = Stockholder's Equity after acquisition - Stockholder's Equity before acquisition
= ($250,000 + $550,000) - ($200,000 + $350,000)
= $700,000 - $550,000
= $250,000
Market price of shares = $20
Number of shares issued = $250,000 / $20
= 12,500 shares
35. (d) $4
Explanation:
Par Value of common stock = Increase in par value of outstanding shares / Number of shares issued
= ($250,000 - $200,000) / 12,500 shares
= $4 per share
36. (c) $194,000
Explanation:
Net Assets + Goodwill = Addition in stockholder's Equity
Net Assets + $56,000 = $250,000
Net Assets = $194,000
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