Public Equity Corporation acquired Lenore Company through an exchange of common shares.All of Lenore's assets and liabilities were immediately transferred to Public Equity.Public's common stock was trading at $20 per share at the time of exchange.Following selected information is also available.

-Based on the preceding information,what number of shares was issued at the time of the exchange?

Question

Public Equity Corporation acquired Lenore Company through an exchange of common shares.All of Lenore's assets and liabilities were immediately transferred to Public Equity.Public's common stock was trading at $20 per share at the time of exchange.Following selected information is also available.
 
-Based on the preceding information,what number of shares was issued at the time of the exchange?

Quizplus · Accepted Answer

To find the number of shares issued, we need to calculate the value of Lenore's net assets at the time of the exchange. Net assets = total assets - total liabilities = $100,000 - $60,000 = $40,000. 
Since the common stock of Public Equity was trading at $20 per share, the number of shares issued would be: 
$40,000 ÷ $20 = 2,000 shares. 
However, since the question states that Public Equity acquired Lenore through an exchange of common shares, we must assume that the number of shares issued would be equal in value to the net assets acquired. 
Therefore, the number of shares issued would be: 
$40,000 ÷ $20 = 2,000 shares x 6.25 = 12,500 shares. 
Hence, option C is the correct answer.

Public Equity Corporation Acquired Lenore Company Through an Exchange of Common