Examlex

Solved

Pinehollow Acquired All of the Outstanding Stock of Stonebriar by Issuing

question 31

Multiple Choice

Pinehollow acquired all of the outstanding stock of Stonebriar by issuing 100,000 shares of its $1 par value stock.The shares have a fair value of $15 per share.Pinehollow also paid $25,000 in direct acquisition costs.Prior to the transaction, the companies have the following balance sheets:
 Assets  Pinehollow  Stonebriar  Cash $150,000$50,000 Accounts receivable 500,000350,000 Inventory 900,000600,000 Property, plant, and equipment (net)  1,850,000900,000 Total assets $3,400,000$1,900,000 Liabilities and Stockholders’ Equity  Current liabilities $300,000$100,000 Bonds payable 1,000,000600,000 Common stock ( $1 par)  300,000100,000 Paid-in capital in excess of par 800,000900,000 Retained earnings 1,000,000200,000 Total liabilities and equity $3,400,000$1,900,000\begin{array}{lrr}\text { Assets } &\text { Pinehollow } & \text { Stonebriar }\\\text { Cash } & \$ 150,000 & \$ 50,000 \\\text { Accounts receivable } & 500,000 & 350,000 \\\text { Inventory } & 900,000 & 600,000 \\\text { Property, plant, and equipment (net) } & \underline{1,850,000} & 900,000 \\\text { Total assets } & \$ 3,400,000 & \$ 1,900,000\\\\\text { Liabilities and Stockholders' Equity }\\ \text { Current liabilities } & \$ 300,000 & \$ 100,000 \\\text { Bonds payable } & 1,000,000 & 600,000 \\\text { Common stock ( } \$ 1 \text { par) } & 300,000 & 100,000 \\\text { Paid-in capital in excess of par } & 800,000 & 900,000 \\\text { Retained earnings } & \underline{1,000,000} & \underline{200,000} \\\text { Total liabilities and equity } & \$ 3,400,000 & \$ 1,900,000\end{array} The fair values of Stonebriar's inventory and plant, property and equipment are $700,000 and $1,000,000, respectively.The journal entry to record the purchase of Stonebriar would include a


Definitions:

Express Authority

Pertains to the power explicitly granted by one party to another, typically in writing, to perform specific acts or functions.

Implied Authority

Powers not expressly stated but assumed to be granted in order for an individual to carry out duties effectively.

Apparent Authority

A situation where a third party reasonably believes an individual has the authority to act on behalf of another (such as an employer), even if that person does not have actual authority.

Ratified

An agreement or decision that has been formally approved and confirmed by the required parties.

Related Questions