Carnes Has the Following Account Balances as of May 1

question 52

Multiple Choice

Carnes has the following account balances as of May 1, 2010 before an acquisition transaction takes place.

The fair value of Carnes' Land and Buildings are $650,000 and $550,000, respectively. On May 1, 2010, 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. Riley paid $10,000 for costs to issue the new shares of stock. Before the acquisition, Riley has $700,000 in its common stock account and $300,000 in its additional paid-in capital account.
At the date of acquisition, by how much does Riley's additional paid-in capital increase or decrease?

• A) $0.
• B) $440,000 increase.
• C) $450,000 increase.
• D) $640,000 increase.
• E) $650,000 decrease.

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Definitions:

Mild Feeling Of Euphoria

A light and often fleeting experience of happiness and well-being, without a specific or identifiable cause.

Distortions

Alterations or misrepresentations of perceptual or cognitive information, which can lead to inaccuracies in perception, memory, or thought.

Sensory And Perceptual Processes

The stages of receiving external stimulus through the senses and interpreting those signals to form a coherent understanding of the environment.

Hallucinogen

A substance that causes alterations in perception, mood, and cognitive processes, producing experiences that may differ drastically from reality.