Octane Company and Bio Company have announced terms of an exchange agreement under which Octane will issue 10,000 shares of its $5 par value common stock to acquire all of Bio's assets.Octane shares are trading at $28,and Bio's $10 par value shares are trading at $15.Historical cost and fair value balance sheet data on January 1,2008,are as follows:

-Based on the information provided,what amount will be reported for Common Stock in the combined company's balance sheet immediately following the business combination?

Question

Octane Company and Bio Company have announced terms of an exchange agreement under which Octane will issue 10,000 shares of its $5 par value common stock to acquire all of Bio's assets.Octane shares are trading at $28,and Bio's $10 par value shares are trading at $15.Historical cost and fair value balance sheet data on January 1,2008,are as follows:
 
-Based on the information provided,what amount will be reported for Common Stock in the combined company's balance sheet immediately following the business combination?

Quizplus · Accepted Answer

The correct answer is A because the combined company's Common Stock will be equal to the sum of the individual companies' Common Stock accounts. In this case, Company A has $200,000 of Common Stock and Company B has $10,000 of Common Stock, so the combined company will have $210,000 of Common Stock.

Octane Company and Bio Company Have Announced Terms of an Exchange