REFERENCE: Ref.02_05 Carnes Has the Following Account Balances as of May 1,2000

question 62

Multiple Choice

REFERENCE: Ref.02_05
Carnes has the following account balances as of May 1,2000 before a pooling of interests transaction takes place. The fair value of Carnes' Land and Buildings are $650,000 and $550,000,respectively.On May 1,2000,Riley Company issues 30,000 shares of its $10 par value ($25 fair value) common stock in exchange for all of the shares of Carnes' common stock.
-Assume Riley issues 70,000 shares instead of 30,000 at date of pooling.Assume Riley has no additional paid-in capital on its books.By how much will Riley's retained earnings increase or decrease as a result of the combination?

• A)$100,000 increase.
• B)$200,000 increase.
• C)$100,000 decrease.
• D)$200,000 decrease.
• E)No change.

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Definitions:

Endogenous Depression

A depression that appears to develop without external reasons and is assumed to be caused by internal factors.

Reactive Depression

A depression that appears to be triggered by clear events. Also known as exogenous depression.

Stressful Life Events

Experiences or situations that are perceived as threats to one's personal well-being and significantly challenge one's ability to cope.

Reactive Depression

A form of depression that is a direct response to a stressful or traumatic event in someone's life.