An acquiring company pays $45 million in cash, and issues new no-par stock with a fair value of $75 million, to the acquired company's former owners, for the assets and liabilities of the acquired company. Registration fees associated with the new stock issuance are $300,000, paid in cash. Consulting fees for the acquisition are $1 million, paid in cash. The fair value of the acquired company's identifiable net assets is $65 million. The entry or entries the acquiring company makes to record the acquisition have what net effect on its account balances? Select one: O A. Capital stock increases by $75 million. O B. Expenses increase by 1.3 million. O C. Goodwill increases by $55 million. O D. Cash decreases by $46 million.
An acquiring company pays $45 million in cash, and issues new no-par stock with a fair value of $75 million, to the acquired company's former owners, for the assets and liabilities of the acquired company. Registration fees associated with the new stock issuance are $300,000, paid in cash. Consulting fees for the acquisition are $1 million, paid in cash. The fair value of the acquired company's identifiable net assets is $65 million. The entry or entries the acquiring company makes to record the acquisition have what net effect on its account balances? Select one: O A. Capital stock increases by $75 million. O B. Expenses increase by 1.3 million. O C. Goodwill increases by $55 million. O D. Cash decreases by $46 million.
Chapter7: Corporations: Reorganizations
Section: Chapter Questions
Problem 23P
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Transcribed Image Text:An acquiring company pays $45 million in cash, and issues new no-par stock with a fair value of $75 million, to the acquired company's former owners, for the assets and liabilities of the acquired company. Registration fees
associated with the new stock issuance are $300,000, paid in cash. Consulting fees for the acquisition are $1 million, paid in cash. The fair value of the acquired company's identifiable net assets is $65 million.
The entry or entries the acquiring company makes to record the acquisition have what net effect on its account balances?
Select one:
O A. Capital stock increases by $75 million.
O
B. Expenses increase by 1.3 million.
C. Goodwill increases by $55 million.
O
D. Cash decreases by $46 million.
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