Maxwell acquires 100 percent of the outstanding voting shares of Daisy Company on January 1, 2016....
Maxwell acquires 100 percent of the outstanding voting shares of Daisy Company on January 1, 2016. To obtain these shares, Maxwell pays $200,000 cash and issues 6,000 shares of $5 par value common stock on this date. Maxwell’s stock had a fair value of $20 per share. Maxwell also pays an additional $4,000 in stock issuance costs. At date of acquisition, the book values and fair values of Daisy's net assets amounted to $230,000 and $265,000, respectively. How much additional paid-in capital was recorded as a result of the combination? Please show solutions.
Homework Answers
ANSWER:
Additional Paid in capital is the value of shares above the par value.
Par Value per share of stock issued $5 and Market price is $20.
Value above par value per share is $15 [$20-$5]
Number of shares issued is 6000
Additional Paid in Capital [6000 x $15] = $90000
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