Carnes Has the Following Account Balances as of May 1

question 13

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.