Porpoise Corporation acquired Sims Company through an exchange of common shares.All of Sims' assets and liabilities were immediately transferred to Porpoise.Porpoise Company's common stock was trading at $20 per share at the time of exchange.The following selected information is also available: $\begin{array}{lcc} &\text { Porpoise Company }\
& \text { Before Acquisition } & \text { After Acquisition } \
\text { Par value of shares outstanding } & \$ 200,000 & \$ 250,000 \
\text { Additional Paid in Capital } & 350,000 & 550,000
\end{array}$ What number of shares was issued at the time of the exchange?

Question

Quizplus · Accepted Answer

The number of shares issued at the time of the exchange can be calculated as follows:Consideration transferred = Fair value of Sims Company= Number of shares issued * Market price per share= (Par value of shares outstanding + Additional Paid in Capital) after acquisition - (Par value of shares outstanding + Additional Paid in Capital) before acquisition= ($250,000 + $550,000) - ($200,000 + $350,000)= $100,000Number of shares issued = Consideration transferred / Market price per share= $100,000 / $20= 5,000 sharesTherefore, the number of shares issued at the time of the exchange was 5,000.

Porpoise Corporation Acquired Sims Company Through an Exchange of Common