In this acquisition business combination, what total amount of common stock and additional paid-in capital should Goodwin recognize on its consolidated financial statements?
A) $ 265.
B) $1,165.
C) $1,200.
D) $1,235.
E) $1,765.

Question

Quizplus · Accepted Answer

The total amount of consideration paid by Goodwin in this acquisition is $1,200, which consists of $750 in cash plus $450 of Goodwin's own common stock (7,500 shares x $60 per share).

The common stock and additional paid-in capital that Goodwin should recognize on its consolidated financial statements is equal to the fair value of the stock issued in the acquisition. To calculate this, we need to know the fair value of Goodwin's common stock.

We are told that the fair value of Goodwin's common stock at the acquisition date is $115 per share. Therefore, the total fair value of the 7,500 shares issued by Goodwin in the acquisition is:

7,500 shares x $115 per share = $862,500

This amount should be split between common stock and additional paid-in capital in accordance with the legal requirements in the state of incorporation (which are not provided in the question). For simplicity, we will assume that the entire amount is recorded as additional paid-in capital.

Therefore, the total amount of common stock and additional paid-in capital that Goodwin should recognize on its consolidated financial statements is:

Common stock: $450
Additional paid-in capital: $862,500

Total: $863,000

This amount should be recorded as a non-cash investing and financing activity in the statement of cash flows.

In This Acquisition Business Combination, What Total Amount of Common