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:

Unintended Consequences

Outcomes or effects that are not anticipated or intended, often as a result of an action or decision.

Acute Injuries

Injuries that occur suddenly and typically as a result of a specific impact or traumatic event, often requiring immediate medical attention.

Federal Government

The national government of a federal country, which shares power with state or provincial governments under a system of federalism.

Mob Mentality

The tendency for people in a large group to lose their individual decision-making ability and follow the crowd, often resulting in impulsive actions.