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Pendragon Co. issues 200,000 shares of $5 par value common stock to acquireSquire Co. in a business combination. The market value of Pendragon’s common stock is$12. Legal and consulting fees incurred in relationship to the combination are $110,000. Direct registration and issuance costs for the common stock are $35,000. What should berecorded in Pendragon’s additional paid­in capital (APIC) for this business combination?

A, $1,545,000
B, $1,400,000
C, $1,365,000
D, $1,255,000

Respuesta :

Answer:

$ 1365000

Explanation:

Given:

Shares issued = 200000

Par value = $ 5

Market value = $ 12

Legal and consulting fees = $ 110000

Direct registration and issuance costs = $ 35,000

now,

Fair value of all the shares = 200000 × $ 12 = $ 2400000

Par value for all the shares = 200000 × $ 5 = $ 1000,000

thus, the additional capital paid = $ 2400000 - $ 1000000 = $ 1400000

Now,

Net additional capital paid = $ 1400000 - $ 35000 = $ 1365000

Since the legal and consulting fees are expenses, thus not deducted from the additional capital

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