Bigger Company purchases Smallish Company on 12/31/X3. On that date, the fair value of Bigger Company's stock
Question:
Bigger Company purchases Smallish Company on 12/31/X3. On that date, the fair value of Bigger Company's stock is $40 per share. Smallish Company continues to exist as a legal entity.
On 12/31/X3:
- Bigger Company issues 3,000 shares of common stock to the Smallish Company shareholders for the purchase.
- Bigger Company pays $13,000 in legal fees and $5,000 in costs related to issuing the new shares.
The separate company balance sheets just prior to recording the transactions above are as follows:
1. After recording the acquisition, what is the balance on the separate balance sheet for Bigger Company in the Additional paid in capital account?
2. After recording the acquisition, what is the balance on the separate balance sheet for Bigger Company in the Retained Earnings account?
3. After recording the acquisition, what is the balance on the consolidated balance sheet in the Retained Earnings account?
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker