12. Bullen Inc. acquired 100% of the votrg common stock of Vicker Inc. on Januar

Question

12. Bullen Inc. acquired 100% of the votrg common stock of Vicker Inc. on January 1, 2013. The book value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along with the book vakue of Bullen's accounts: Bullen Book Value VickerVicker Book Yalus Value Fair Retained earnings, 1/1/15 Cash and receivables Inventory Land Buildings (net) Equipment (net) Liabilities Common stock Additional paid-in capital $250,000 $240,000 70,000 $70,000 170,000 230,000 170,000 210,000 280,000 220,000 240,000 480,000 240,000 270,000 120,000 650,000 430,000 420,000 360,000 90,000 90,000 80,000 40,000 20,000 Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $42 fair value for all of the outstanding shares of Vicker. What will be the consolidated Additional Paid- In Capital and Retained Earnings (January 1, 2013 balances) as a result of this acquisition transaction? A. $60,000 and $490,000. B. $60,000 and $250,000. S380,000 and $250,000. D. $464,000 and $250,000. C. E. $464,000 and $420,000

Explanation / Answer

Since Goodwill aquired on aquitsion of Vicker Inc)

Par value $ 5 per share Fair value $ 42 per share Additional paid in capital $ 37 per share Total shares issued on acquisition 12000 shares Additional paid in capital 444000 Add: Existing additional paid in capital in Bullen Inc 20000 Total additional paid in capital 464000 Existing Retained earnings 250000 (No change)

Since Goodwill aquired on aquitsion of Vicker Inc)

Working of Goodwill in $ Cash 70000 Inventory 210000 Land 240000 Equipment 90000 Buildings 270000 Total assets 880000 (Less) Liabilities -420000 Net Assets 460000 Retained earnings 240000 Total Fair value of the assets 700000 Less: Acquisition value 504000 (12000*42) Goodwill on Acquisition 196000 Therefore Answer: "      D      "

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