Chapel Hill Company had common stock of $350,000 and retained earnings of $490,000. Blue Town Inc. had common stock of $700,000 and retained earnings of $980,000. On January 1, 2011, Blue Town issued 34,000 shares of common stock with a $12 par value and a $35 fair value for all of Chapel Hill Company's outstanding common stock. This combination was accounted for as an acquisition. Immediately after the combination, what was the total consolidated net assets?

Question

Quizplus · Accepted Answer

The total consolidated net assets are calculated by adding the fair value of the consideration given by Blue Town ($35 * 34,000 shares = $1,190,000) to Blue Town's existing net assets ($700,000 common stock + $980,000 retained earnings = $1,680,000), resulting in $2,870,000.

Chapel Hill Company Had Common Stock of $350,000 and Retained