A) $1,350.
B) $1,110.
C) $1,080.
D) $1,085.
E) $ 635.
Answer: D
Learning Objective: 02-05
Learning Objective: 02-06a
Learning Objective: 02-06b
Learning Objective: 02-07
Topic: Costs of combination
Topic: Acquisition―Calculate consolidated balances
Topic: Consolidation worksheet
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: Cash of Parent + Cash of Subsidiary – (Post-Transaction Costs + Post-Transaction Expenses) = $870 + $240 –($15 + $10) = $870 + $240 – $25 = $1,085
REFERENCE: 02-08
Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2018. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000 shares of $20 par value common stock on this date. Flynn’s stock had a fair value of $36 per share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance costs.
The book values for both Flynn and Macek as of January 1, 2018 follow. The fair value of each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any related question also is in thousands.
Flynn, Inc
.
Macek Company
Book Value
Fair Value
Cash
$ 900
$ 80
$ 80
Receivables
480
180
160
Inventory
660
260
300
Land
300
120
130
Buildings (net)
1,200
220
280
Equipment
360
100
75
Accounts payable
480
60
60
Long
–
term liabilities
1,140
340
300
Common stock
1,000
80
Additional paid-in capital
Retained earnings
200
1,080
0
480
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