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 immediately following the business combination for Retained Earnings in the combined company's balance sheet?

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 immediately following the business combination for Retained Earnings in the combined company's balance sheet?

Quizplus · Accepted Answer

The correct answer is A because the combined retained earnings will be the sum of the individual retained earnings of the two companies, which is $170,000.

Octane Company and Bio Company Have Announced Terms of an Exchange