Prior to being united in a business combination, Botkins Inc. and Volkerson Corp. had the following stockholders' equity figures: Botkins issued 56,000 new shares of its common stock valued at $3.25 per share for all of the outstanding stock of Volkerson. Assume that Botkins acquired Volkerson on January 1, 2010. Immediately afterwards, what is consolidated Common Stock?

Question

Prior to being united in a business combination, Botkins Inc. and Volkerson Corp. had the following stockholders' equity figures:  Botkins issued 56,000 new shares of its common stock valued at $3.25 per share for all of the outstanding stock of Volkerson. Assume that Botkins acquired Volkerson on January 1, 2010. Immediately afterwards, what is consolidated Common Stock?

Quizplus · Accepted Answer

Botkins Inc. common stock before issuance = $240,000 ($6 x 40,000)

Volkerson Corp. common stock = $36,000 ($6 x 6,000)

Total common stock before combination = $276,000 ($240,000 + $36,000)

After issuing 56,000 new shares for the acquisition:

Botkins Inc. common stock = $456,000 ($240,000 + $3.25 x 56,000)

Consolidated common stock = $456,000 (since all of Volkerson's outstanding stock was exchanged for Botkins stock)

Prior to Being United in a Business Combination, Botkins Inc