Question

On May 1, Sequoia Inc. issued 30,000 shares of its common stock with a $15 par value and $50 fair value in exchange for all of Saguaro Inc. outstanding common stock. As a result of this acquisition Saguaro ceased to exist as a separate legal entity. On the date of the acquisition, Saguaro had net assets with a book value of $900,000 and fair market value of $1,280,000. Sequoia's journal entry to record this transaction should include: $1,500,000 credit to Additional Paid in Capital $450,000 credit to Additional Paid in Capital $450,000 debit to Common Stock $450,000 credit to Common Stock All answers are incorrect.

Answer 1

Correct answer----$450,000 credit to Common Stock.

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New shares issued are 30000

Par value per share=$15

Amount to be credited to common stock account= $ x 30000

Amount to be credited to common stock account= $450,000

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All other options are incorrect