Question

On January 1, 20X1, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Inventory by $10, Land by $40, and Buildings by $60. 6. Compute the amount of consolidated buildings (net) at date of acquisition.
A. $1,700.
B. $1,760.
C. $1,640.
D. $1,320.
E. $500.

Answer 1

Answer:

B. $1,760

Explanation:

Given that:

Liabilities = $400, shares = 40 shares, par value = $1 per share, undervalued building asset = $60, net building amount = $1260

amount of consolidated buildings (net) at date of acquisition = net amount for buildings + amount of undervalued building asset + $400 + ($1.00 x 40 shares)  

amount of consolidated buildings (net) at date of acquisition = $1260 + $60 + $400 + $40 = $1760