What should be recorded in a Planet's additional paid-in capital account for this business combination

Planet Co. issues 300,000 shares of $4 par value common stock to acquire Star Co. in a business combination. The market value of Planet's common stock is $16. Planet incurs legal and appraisal fees of $100,000 with the combination and stock issue costs of $40,000. What should be recorded in a Planet's additional paid-in capital account for this business combination.

Expert Solution

Fair value - ( 300,000 shares x $ 16/ share) = $ 4,800,000

Par value - ( 300,000 shares x $ 4 / share ) = $ 1,200,000

Gross Additional Paid-in Capital = $ 4,800,000 - $ 1,200,000 = $ 3,600,000

Less: Issuance Costs - $ 40,000

Net additional paid-in capital - $ 3,560,000

The legal and appraisal fees ($100,000) were paid in cash and would be expensed in the period incurred. The registration and issuance costs of the common stock are properly deducted from the additional paid-in capital derived from the issuance of the stock.

Additional Paid-In Capital: $3,560,000

Soumik Mallick Choudhury answered 2 years ago

What are the advantages and disadvantages of business combination?

(a) Why should capital budgeting for subsidiary projects be assessed from the parent’s perspective? What additional...

(a) Why should capital budgeting for subsidiary projects be assessed from the parent’s perspective? What additional factors that normally are not relevant for a purely domestic project deserve consideration in multinational capital budgeting? (b) Briefly explain how interest rate risk can be hedge through an interest rate swap? (Please provide detailed answers)

a. _____ T or F Stock options are recorded as paid-in-capital over the period during which...

a. _____ T or F Stock options are recorded as paid-in-capital over the period during which the employee provides associated service to vest in the options. (if false, identify and correct the errors) b. _____ T or F Stock appreciation rights give the employee compensation at a future date, based on the market price at the date of exercise in excess of a pre-established price. (if false, identify and correct the errors) ?

Total Assets $7,082,500 Total Liabilities 1,700,000 Common Stock 1,250,000 Additional Paid in Capital 2,097,500 Donated Capital...

Total Assets $7,082,500 Total Liabilities 1,700,000 Common Stock 1,250,000 Additional Paid in Capital 2,097,500 Donated Capital 90,000 Ret. Earnings 1/1/Year4 1,650,000 Net Sales 6,250,000 Cost of Sales 3,750,000 Selling & Adm Expenses 1,212,500 Interest Expense 122,500 gain on sale of LT Investments 130,000 Income Tax Expense 300,000 Loss on Disposition of Plant Assets 225,000 Loss due to Earthquake Damage 475,000 Pucket Corp. is in the process of preparing its financial statements for the year ended December 31, Year4. Before closing...

What is the net of the capital account?

Consider the following events:Overseas telecommunication companies are paying $400,000 to US filmmakers for broadcasting TV shows.Morgan Stanley bought US Treasury Bills worth $1 Billion.A Canadian liquor store LCBO sold ice vine worth $100,000, $30,000 of which was sold to US customers.A US telecom company bought patents from Nokia (Finland) for $1 million.Wells Fargo received $500,000 in dividends from overseas holdings.US Government contributed $100,000 to the BIRD foundation sponsoring research at Tel Aviv University.A senior residing in New York moved to...

XYZ Inc., has $100 to spend on capital budgeting projects. Which combination of projects should the...

XYZ Inc., has $100 to spend on capital budgeting projects. Which combination of projects should the company undertake? Note that the goal is choose the combination of projects that maximizes the firm’s value. Project cost NPV IRR A $30 $9 20% B $60 $15 13% C $45 $20 12% D $35 $13 17% E $25 $12 16% a. C, A b. C, E c. C, E, A d. B, C, D

Which of the following accounts should be closed to the capital account at the end of...

Which of the following accounts should be closed to the capital account at the end of the year? Equipment Service Revenue Prepaid Insurance Unearned Rentx

Indicate whether Paid-in Capital in Excess of Par is a debit or credit account and whether...

Indicate whether Paid-in Capital in Excess of Par is a debit or credit account and whether it is closed or not closed each period. Select one: a. Debit, closed b. Debit, not closed c. Credit, closed d. Credit, not closed The coupon (stated) rate of interest is used to determine: Select one: a. The discount or premium recorded when the bond is issued. b. The amount of cash interest the bond issuer pays to the investor on the interest payment...

What sample should be used for crossmatching the additional units?

A patient was transfused in the emergency room with 14 units of O negative red cells over a period of 6 hours. The acute bleeding was stopped and the patient was transferred to ICU for continued care. Type and screen on the original sample was O positive with a negative antibody screen at all phases of testing. An H&H from the ICU was 8 g/dl hgb & 24.7 hct. The physician ordered an additional 4 units of packed red cells.QUESTIONS:What...

On December 31, 20X3, Broadway Corporation reported common stock outstanding of $200,000, additional paid-in capital of...

On December 31, 20X3, Broadway Corporation reported common stock outstanding of $200,000, additional paid-in capital of $300,000, and retained earnings of $100,000. On January 1, 20X4, Johe Company acquired control of Broadway in a business combination. Required: Give the Consolidation entry that would be needed in preparing a consolidated balance sheet immediately following the combination if Johe acquired all of Broadway’s outstanding common stock for $600,000. (If no entry is required for a transaction/event, select "No journal entry required" in...

Question