Carnes has the following account balances as of May 1, 2012 before an acquisition transaction takes place. The fair value of Carnes' Land and Buildings are $650,000 and $550,000, respectively. On May 1, 2012, Riley Company issues 30,000 shares of its $10 par value ($25 fair value) common stock in exchange for all of the shares of Carnes' common stock. Riley paid $10,000 for costs to issue the new shares of stock. Before the acquisition, Riley has $700,000 in its common stock account and $300,000 in its additional paid-in capital account.
On May 1, 2012, what value is assigned to Riley's investment account?
A) $150,000.
B) $300,000.
C) $750,000.
D) $760,000.
E) $1,350,000.

Question

Carnes has the following account balances as of May 1, 2012 before an acquisition transaction takes place.  The fair value of Carnes' Land and Buildings are $650,000 and $550,000, respectively. On May 1, 2012, Riley Company issues 30,000 shares of its $10 par value ($25 fair value) common stock in exchange for all of the shares of Carnes' common stock. Riley paid $10,000 for costs to issue the new shares of stock. Before the acquisition, Riley has $700,000 in its common stock account and $300,000 in its additional paid-in capital account.
On May 1, 2012, what value is assigned to Riley's investment account?
A) $150,000. 
B) $300,000. 
C) $750,000. 
D) $760,000. 
E) $1,350,000.

Quizplus · Accepted Answer

$25 × 30,000 shares = $750,000

Carnes Has the Following Account Balances as of May 1