On January 1, 20X1, the Moody Company Entered into a Transaction

question 65

Multiple Choice

On January 1, 20X1, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Note: Parentheses indicate a credit balance. In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
Compute the amount of consolidated common stock at date of acquisition.

• A) $370.
• B) $570.
• C) $610.
• D) $330.
• E) $530.

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Definitions:

Capitalism

An economic system characterized by private ownership of the means of production and the creation of goods or services for profit.

Self-Interest

The motivation of individuals to pursue their own advantages and well-being.

Price Ceilings

Price controls that outlaw trade at prices above the ceiling.

Intended

Something that is planned or meant to happen in a specific way.