Flynn Acquires 100 Percent of the Outstanding Voting Shares of Macek

question 88

Multiple Choice

Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2013. To obtain these shares, Flynn pays $400 cash (in thousands) and issues 10,000 shares of $20 par value common stock on this date. Flynn's stock had a fair value of $36 per share on that date. Flynn also pays $15 (in thousands) to a local investment firm for arranging the acquisition. An additional $10 (in thousands) was paid by Flynn in stock issuance costs. The book values for both Flynn and Macek as of January 1, 2013 follow. The fair value of each of Flynn and Macek accounts is also included. In addition, Macek holds a fully amortized trademark that still retains a $40 (in thousands) value. The figures below are in thousands. Any related question also is in thousands. $\begin{array}{lrrr}&\text { Flynn, Ine. }&\text { Macek Company }\\&&\text { Book Value }&\text { Fair Value }\\\text { Cash } & \$ 900 & \$ 80 & \$ 80 \\\text { Receivables } & 480 & 180 & 160 \\\text { Inventory } & 660 & 260 & 300 \\\text { Land } & 300 & 120 & 130 \\\text { Buildings (net) } & 1,200 & 220 & 280 \\\text { Equipment } & 360 & 100 & 75 \\\text { Accounts payable } & 480 & 60 & 60 \\\text { Long-term liabilities } & 1,140 & 340 & 300\\\text { Common stock } & 1,000 & 80 \\\text { Additional paid-in capital } & 200 & 0 \\\text { Retained earnings } & 1,080 & 480\end{array}$ What amount will be reported for consolidated equipment (net) ?

• A)$385,000.
• B)$335,000.
• C)$435,000.
• D)$460,000.
• E)$360,000.

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Definitions:

Majority Rule

A decision rule that selects alternatives which have a majority, that is, more than half the votes.

Logrolling

The practice of exchanging favors, especially in politics by reciprocal voting for each other's proposed legislation.

Public Choice

A field of economics that applies economic methods to the study of political and administrative decision-making.

Bureaucratic Waste

Inefficiencies and wasted resources resulting from the cumbersome procedures, redundant paperwork, and unnecessary red tape often associated with large administrative systems.