When It Purchased Sutton, Inc Immediately After the Purchase, the Consolidated Balance Sheet Should Report

question 39

Multiple Choice

When it purchased Sutton, Inc.on January 1, 2016, Pavin Corporation issued 500,000 shares of its $5 par voting common stock.On that date the fair value of those shares totaled $4,200,000.Related to the acquisition, Pavin had payments to the attorneys and accountants of $200,000, and stock issuance fees of $100,000.Immediately prior to the purchase, the equity sections of the two firms appeared as follows:
$\begin{array}{lrr}& \underline { \text { Pavin } } & \text { Sutton } \\\text { Common stock } & \$ 4,000,000 & \$ 700,000 \\\text { Paid-in capital in excess of par } & 7,500,000 & 900,000 \\\text { Retained earnings } & 5,500,000 & 500,000 \\\text { Total } & \$ 17,000,000 & \$ 2,100,000 \\\end{array}$
Immediately after the purchase, the consolidated balance sheet should report paid-in capital in excess of par of

• A)$8,900,000
• B)$9,100,000
• C)$9,200,000
• D)$9,300,000

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Definitions:

Machine-Hours

A measure of the total time machines are in operation during a given period, often used in cost accounting to allocate expenses based on machine usage.

Production Departments

Departments within a manufacturing company responsible for different stages of production processes.

Conversion Cost

The sum of labor and overhead expenses required to convert raw materials into finished goods.

Manufacturing Overhead

Indirect factory-related costs incurred when a product is manufactured, including costs like maintenance, electricity, and equipment depreciation.