By how much will Flynn’s additional paid-in capital increase as a result of this acquisition?

A)  $150,000.

B)  $160,000.

C)  $230,000.

D)  $350,000.

E)  $360,000.

Answer: A  

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: 2 Medium

Blooms: Apply

AACSB: Knowledge Application

AICPA: BB Critical Thinking

AICPA: FN Measurement

Feedback: APIC adjusted for excess of fair value of stock issued as business combination consideration over its par value, and stock issuance costs

Excess of Fair Value Over Par Value = $36 – $20 = $16 per share

Total Excess = $16 × 10,000 shares = $160,000

Stock Issuance Costs: $10,000

Total APIC Adjustment = $160,000 – $10,000 = $150,000