3)Which of the following statements is true regarding a statutory consolidation?

Question

3)Which of the following statements is true regarding a statutory consolidation?
A. A statutory consolidation is no longer a legal option.
B. Both companies remain in existence as legal corporations with one corporation now a subsidiary of the acquiring company.
C. The acquired company dissolves as a separate corporation and becomes a division of the acquiring company.
D. The acquiring company acquires the stock of the acquired company as an investment.
E. The original companies dissolve while remaining as separate divisions of a newly created company.

4)On January 17, 2018, Planet Company issues 40,000 shares of its $10 par value ($25 fair value) common stock in exchange for all of the shares of Silkway' common stock. Planet paid $10,000 for costs to issue the new shares of stock. Before the acquisition, Planet has $700,000 in its common stock account and $300,000 in its additional paid-in capital account.

What will be Planet's balance in its common stock account as a result of this acquisition?

A. $400,000.
B. $1,090,000.
C. $1,100,000.
D. $1,290,000.
E. $1,300,000.

Explanation / Answer

Question No. 3

E. The original companies dissolve while remaining as separate divisions of a newly created company.

Question No. 4

Planet common stock account as a result of this acquisition

Planet common stock account before acquisition = $700,000

Planet issues 40,000 shares of common stock at $10 par value for acquisition = $400,000

Planet common stock account as a result of this acquisition =$1,100,000

Answer C

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