Explore BrainMass

Explore BrainMass

    Saxe Corporation was merged into Poe Corporation.

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Please help!

    Multiple-Choice Questions on Reported Balances [AICPA Adapted]
    Select the correct answer for each of the following questions.
    1. On December 31, 20X3, Saxe Corporation was merged into Poe Corporation. In the business combination, Poe issued 200,000 shares of its $10 par common stock, with a market price of $18 a share, for all of Saxe's common stock. The stockholders' equity section of each company's balance sheet immediately before the combination was:
    Poe Saxe
    Common Stock $3,000,000 $1,500,000
    Additional Paid-In Capital 1,300,000 150,000
    Retained Earnings 2,500,000 850,000
    $6,800,000 $2,500,000
    In the December 31, 20X3, consolidated balance sheet, additional paid-in capital should be reported at:
    a. $950,000.
    b. $1,300,000.
    c. $1,450,000.
    d. $2,900,000.

    2. On January 1, 20X1, Rolan Corporation issued 10,000 shares of common stock in exchange for all of Sandin Corporation's outstanding stock. Condensed balance sheets of Rolan and Sandin immediately before the combination follow:
    Rolan Sandin
    Total Assets $1,000,000 $500,000
    Liabilities $ 300,000 $150,000
    Common Stock ($10 par) 200,000 100,000
    Retained Earnings 500,000 250,000
    Total Liabilities and Equities $1,000,000 $500,000
    Rolan's common stock had a market price of $60 per share on January 1, 20X1. The market price of Sandin's stock was not readily ascertainable. Rolan's investment in Sandin's stock will be stated in Rolan's balance sheet immediately after the combination in the amount of:
    a. $100,000.
    b. $350,000.
    c. $500,000.
    d. $600,000.

    3. On February 15, 20X1, Reed Corporation paid $1,500,000 for all of Cord Inc.'s issued and outstanding common stock. The book values and fair values of Cord's assets and liabilities on February 15, 20X1, were as follows:
    Book Value Fair Value
    Cash $ 160,000 $ 160,000
    Receivables 180,000 180,000
    Inventory 290,000 270,000
    Property, plant, and equipment 870,000 960,000
    Liabilities (350,000) (350,000)
    Net worth $1,150,000 $1,220,000
    What is the amount of goodwill resulting from the business combination?
    a. $0.
    b. $70,000.
    c. $280,000.
    d. $350,000.

    4. On April 1, 20X2, Jack Company paid $800,000 for all of Ann Corporation's issued and outstanding common stock. Ann's recorded assets and liabilities on April 1, 20X2, were as follows:
    Cash $ 80,000
    Inventory 240,000
    Property and equipment (net of accumulated depreciation of $320,000) 480,000
    Liabilities (180,000)

    On April 1, 20X2, Ann's inventory was determined to have a fair value of $190,000 and that the property and equipment had a fair value of $560,000. What is the amount of goodwill resulting from the business combination?
    a. $0.
    b. $50,000.
    c. $150,000.
    d. $180,000.

    5. Action Corporation issued nonvoting preferred stock with a fair market value of $4,000,000 in exchange for all the outstanding common stock of Master Corporation. On the date of the exchange, Master had tangible net assets with a book value of $2,000,000 and a fair value of $2,500,000. In addition, Action issued preferred stock valued at $400,000 to an individual as a finder's fee in arranging the transaction. As a result of this transaction, Action should record an increase in net assets of:
    a. $2,000,000.
    b. $2,500,000.
    c. $2,900,000.
    d. $4,400,000.

    © BrainMass Inc. brainmass.com March 4, 2021, 8:19 pm ad1c9bdddf


    Solution Summary

    On December 31, 20X3, Saxe Corporation was merged into Poe Corporation.