At the date of acquisition, by how much does Riley’s additional paid-in capital increase or decrease?

A)  $           0.

B)  $440,000 increase.

C)  $450,000 increase.

D)  $640,000 increase.

E)  $650,000 decrease.

Answer: B

Learning Objective: 02-05 

Learning Objective: 02-06a

Learning Objective: 02-06b

Learning Objective: 02-06c   

Topic: Acquisition―Calculate consideration transferred

Topic: Costs of combination

Topic: Journal entry―Dissolution

Topic: Journal entry―Investment with no dissolution

Difficulty: 1 Easy  

Blooms: Apply

AACSB: Knowledge Application

AICPA: BB Critical Thinking

AICPA: FN Measurement

Feedback: APIC increases by the excess of the fair value over the par value of shares issued in connection with business combination less stock issuance costs.

$25 fair value per share – $10 par value per share = $15 per sharex 30,000 shares = $450,000 – $10,000 stock issuance costs = $440,000