On May 1, Sequoia Inc. issued 30,000 shares of its common stock with a $15 par...
On May 1, Sequoia Inc. issued 30,000 shares of its common stock with a $15 par value and $50 fair value in exchange for all of Saguaro Inc. outstanding common stock. As a result of this acquisition Saguaro ceased to exist as a separate legal entity. On the date of the acquisition, Saguaro had net assets with a book value of $900,000 and fair market value of $1,280,000. Sequoia's journal entry to record this transaction should include:
A. $1,500,000 credit to Additional Paid in Capital
B. $450,000 credit to Additional Paid in Capital
C.$450,000 debit to Common Stock
D. $450,000 credit to Common Stock
E. All answers are incorrect.
Homework Answers
Journal entry
| Date | account and explanation | debit | credit |
| Cash | 1500000 | ||
| Common Stock (30000*15) | 450000 | ||
| Additional paid in capital | 1050000 | ||
So answer is d) $450000 credit to common Stock
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