fair value of the consideration given. fair value of the consideration given plu

Question

fair value of the consideration given. fair value of the consideration given plus an estimated value for goodwill. Which of the following costs of a business combination can be included in the value charged to paid-in-capital in excess of par? direct and indirect acquisition costs direct acquisition costs direct acquisition costs and stock issue costs if stock is issued as consideration stock issue costs if stock is issued as consideration When it purchased Sutton, Inc. on January 1, 2X1, Pavin Corporation issued 5, shares of its $5 par voting common stock. On that date the fair value of those shares totaled $4.2.. Related to the acquisition, Pavin had payments to the attorneys and accountants of $2,. and stock issuance fees of $1.. Immediately prior to the purchase, the equity sections of the two firms appeared as follows: Common stock Pavin Sutton Paid-in capital in excess of par Retained earnings total Immediately after the purchase, the consolidated balance sheet should report paid-in capital in excess of p of

Explanation / Answer

Issuance of shares journal entry:
Cash $3,900,000 ($4,200,000 FV - $200,000 payments to attorneys and $100,000 in issuance fees)
Common Stock $2,500,000 ($5 Par * 500,000 shares)
Additional Paid-in-Capital $1,400,000 (3,900,000-2,500,000)

Pavin has $7,500,000 in paid-in capital in excess of par before the issuance

Prior P.I.C. $7,500,000
Additional P.I.C. from issuance $1,400,000
Total $8,900,000

You do not need to account for Sutton's P.I.C. because the common stock and P.i.C. is retired when purchased.

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