Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2013 are as follows: $\begin{array}{lr}
\text { Jones Company: } & \
\text { Shares outstanding } & 100,000 \
\text { Book value of Jones } & \$ 1,200,000 \
\text { Book value per share } & \$ 12 \
\text { Webb Company: } & \
\text { Shares owned of Jones } &90,000 \
\text { Book value of investment } & \$ 1,080,000
\end{array}$ Assume Jones issues 20,000 new shares of its common stock for $15 per share. Of this total, Webb acquires 18,000 shares to maintain its 90% interest in Jones. What is the adjusted book value of Jones after the stock issuance?
A)$1,500,000.
B)$1,200,000.
C)$1,350,000.
D)$1,080,000.
E)$1,335,000.

Question

Webb Company owns 90% of Jones Company. The original balances presented for Jones and Webb as of January 1, 2013 are as follows: $\begin{array}{lr}
\text { Jones Company: } & \
\text { Shares outstanding } & 100,000 \
\text { Book value of Jones } & \$ 1,200,000 \
\text { Book value per share } & \$ 12 \
\text { Webb Company: } &  \
\text { Shares owned of Jones } &90,000 \
\text { Book value of investment } & \$ 1,080,000
\end{array}$ Assume Jones issues 20,000 new shares of its common stock for $15 per share. Of this total, Webb acquires 18,000 shares to maintain its 90% interest in Jones. What is the adjusted book value of Jones after the stock issuance?
A)$1,500,000.
B)$1,200,000.
C)$1,350,000.
D)$1,080,000.
E)$1,335,000.

Quizplus · Accepted Answer

The adjusted book value of Jones after the stock issuance is calculated by adding the proceeds from the new shares to the original book value. Jones issues 20,000 shares at $15 each, raising $300,000. Adding this to the original book value of $1,200,000 gives a new book value of $1,500,000.

Webb Company Owns 90% of Jones Company Assume Jones Issues 20,000 New Shares of Its Common Stock