Figure:
The financial balances for the Atwood Company and the Franz Company as of December 31, 20X1, are presented below. Also included are the fair values for Franz Company's net assets. Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1. Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid.
-Compute the consolidated common stock at date of acquisition.

Question

Figure:
The financial balances for the Atwood Company and the Franz Company as of December 31, 20X1, are presented below. Also included are the fair values for Franz Company's net assets.  Note: Parenthesis indicate a credit balance
Assume an acquisition business combination took place at December 31, 20X1. Atwood issued 50 shares of its common stock with a fair value of $35 per share for all of the outstanding common shares of Franz. Stock issuance costs of $15 (in thousands) and direct costs of $10 (in thousands) were paid.
-Compute the consolidated common stock at date of acquisition.

Quizplus · Accepted Answer

The consolidated common stock at date of acquisition is the number of shares issued by Atwood for the acquisition of Franz multiplied by the fair value per share of Atwood common stock.

Number of shares issued by Atwood = 50

Fair value per share of Atwood = $35 per share

Consolidated common stock = 50 x $35 = $1,750

Stock issuance costs and direct costs should not be included in the calculation of consolidated common stock.

However, since the question specifically asks for the consolidated common stock at date of acquisition, we need to take into account the fair value of Franz's net assets presented in the figure.

Franz's net assets fair value = $2,230

Thus, the consolidated common stock at date of acquisition is:

$1,750 (total fair value of Atwood shares issued) + $2,230 (fair value of Franz's net assets) = $2,980

Therefore, the best choice is B.

Figure: The Financial Balances for the Atwood Company and the Franz