On January 1, 2021, the Moody Company Entered into a Transaction

question 115

Multiple Choice

On January 1, 2021, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Note: Parentheses indicate a credit balance.In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.Compute the amount of consolidated additional paid-in capital at date of acquisition.

• A) $1,080.
• B) $1,420.
• C) $1,065.
• D) $1,425.
• E) $1,440.

---

Definitions:

Short Run

Within the field of economics, a timeframe where a company has at least one input that remains constant and unalterable.

Total Revenue

The entire revenue a company earns from selling products or services before deducting any costs.

Purely Competitive

A market structure characterized by many buyers and sellers, freely entering and exiting the market, with all firms selling identical or nearly identical products.

Unit Price

The cost per unit of a product or service, making it easier to compare the value of similar items.