Question

On January 1, 2018, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $283,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $20,500 to accountants, lawyers, and brokers for assistance in the acquisition and another $5,500 in connection with stock issuance costs.

Prior to these transactions, the balance sheets for the two companies were as follows:

	Marshall Company Book Value				Tucker Company Book Value
Cash	$	84,600			$	32,400
Receivables		326,000				133,000
Inventory		387,000				169,000
Land		218,000				230,000
Buildings (net)		463,000				271,000
Equipment (net)		253,000				50,400
Accounts payable		(152,000	)			(45,600	)
Long-term liabilities		(433,000	)			(283,000	)
Common stock—$1 par value		(110,000	)
Common stock—$20 par value						(120,000	)
Additional paid-in capital		(360,000	)			0
Retained earnings, 1/1/18		(676,600	)			(437,200	)

Note: Parentheses indicate a credit balance.

In Marshall’s appraisal of Tucker, it deemed three accounts to be undervalued on the subsidiary’s books: Inventory by $8,300, Land by $23,200, and Buildings by $42,200. Marshall plans to maintain Tucker’s separate legal identity and to operate Tucker as a wholly owned subsidiary.

QUESTION: WHAT AMOUNT WILL BE FOR PAID-IN CAPITAL AND RETAINED EARNINGS?

Answer 1

Computation of Paid in Capital & Retained Earning
	Amount	Amount
Common Stock, $1 Par Value
Existing Common Stock	$110,000.00
Share issued by Marshall Company	$20,000.00	$130,000.00
( 20000 Share * $1), $ 1 Par Value
Addition paid In capital
Existing Balance	$360,000.00
Addition paid in Capital by share issued	$180,000.00
( 20000share *$9)
Less: Stock Issuance Cost	-$5,500.00	$534,500.00
Retained Earning
Existing Balance	-$67,600.00
Bargain Purchase Gain	$500.00
Paid Charges to Lawyer	-$20,500.00	-$87,600.00
Computation of Gain/Loss on Bargain Purchase
Cash	$32,400.00
Receivables	$133,000.00
Inventory	$160,700.00
Land	$206,800.00
Building	$228,800.00
Equipmnet	$50,400.00
Account Payable	-$45,600.00
Long term liabilities	-$283,000.00
Net Asset Value (1)	$483,500.00
Share issued by Marshall	$200,000.00
Long term liability	$283,000.00
Total Consideration Paid (2)	$483,000.00
Bargin Purchase Gain (1-2)	$500.00