Octane Company and Bio Company Have Announced Terms of an Exchange

question 12

Multiple Choice

Octane Company and Bio Company have announced terms of an exchange agreement under which Octane will issue 10,000 shares of its $5 par value common stock to acquire all of Bio's assets.Octane shares are trading at $28,and Bio's $10 par value shares are trading at $15.Historical cost and fair value balance sheet data on January 1,2008,are as follows:

-Based on the information provided,what amount will be reported immediately following the business combination for Retained Earnings in the combined company's balance sheet?

• A)$170,000
• B)$225,000
• C)$115,000
• D)$210,000

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Definitions:

Price Level

The mean cost across the full breadth of goods and services currently produced in the economy.

Production

The process of creating goods or services by combining labor, capital, and natural resources.

GDP

Gross Domestic Product, a measure of a country's economic performance, representing the total value of all goods and services produced over a specific time period.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of all finished goods and services produced within a country's borders in a specific time period.