What will be the consolidated additional paid-in capital as a result of this acquisition?

A) $440,000.

B) $740,000.

C) $750,000.

D) $940,000.

E) $950,000.

Answer: B

Learning Objective: 02-05

Learning Objective: 02-06a

Learning Objective: 02-06b

Learning Objective: 02-07

Topic: Acquisition―Calculate consideration transferred

Topic: Costs of combination

Topic: Acquisition―Calculate consolidated balances

Difficulty: 2 Medium

Blooms: Apply

AACSB: Knowledge Application

AICPA: BB Critical Thinking

AICPA: FN Measurement

Feedback: $300,000 (Riley APIC Balance on Acquisition Date) + $440,000 Additional Business Combination Related APIC (Calculated in Question 54) = $740,000

REFERENCE: 02-06

The financial balances for the Atwood Company and the Franz Company as of December 31, 2018, are presented below. Also included are the fair values for Franz Company’s net assets.

Atwood

Franz Co.Franz Co.

(all numbers are in thousands)

Book Value

Fair Value

12/31/2018

Cash

$ 870

$ 240

Receivables

660

600

Inventory

1,230

420

580

Land

1,800

260

250

Buildings (net)

1,800

540

650

Equipment (net)

660

380

400

Accounts payable

( 570)

( 240)

Accrued expenses

( 270)

( 60)

Long-term liabilities

(2,700)

(1,020)

(1,120)

Common stock ($20 par)

(1,980)

Common stock ($5 par)

( 420)

Additional paid-in capital

( 210)

( 180)

Retained earnings

(1,170)

( 480)

Revenues

(2,880)

( 660)

Expenses

2,760

620

Note: Parenthesis indicate a credit balance

Assume an acquisition business combination took place at December 31, 2018. Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid.