Pinnacle Corporation acquired all of Stengl Corporation's common stock by issuing 500,000 shares of $0.01 par common stock with a current market value of $15,000,000. Related accountants' and attorneys' fees were $400,000, paid in cash. The total book value of Stengl's shareholders' equity consists of capital stock of $10,000 and retained earnings of $1,690,000. Book values and fair values of Stengl's assets and liabilities are given below: Book Value Cash and receivables $200,000 Inventories Fair Value $180,000 800,000 500,000 2,000,000 1,300,000 (300,000) (300,000) (1,000,000) (1,100,000) $1,700,000 $580,000 Plant assets, net Current liabilities Long-term debt Totals In addition, Stengl has previously unrecorded identifiable intangible assets with a fair value of $400,000 that meet ASC Topic 805 criteria for recognition.

Pinnacle Corporation acquired all of Stengl Corporation's common stock by issuing 500,000 shares of $0.01 par common stock with a current market value of $15,000,000. Related accountants' and attorneys' fees were $400,000, paid in cash. The total book value of Stengl's shareholders' equity consists of capital stock of $10,000 and retained earnings of $1,690,000. Book values and fair values of Stengl's assets and liabilities are given below: Book Value Cash and receivables $200,000 Inventories Fair Value $180,000 800,000 500,000 2,000,000 1,300,000 (300,000) (300,000) (1,000,000) (1,100,000) $1,700,000 $580,000 Plant assets, net Current liabilities Long-term debt Totals In addition, Stengl has previously unrecorded identifiable intangible assets with a fair value of $400,000 that meet ASC Topic 805 criteria for recognition.

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter8: Consolidated Tax Returns

Section: Chapter Questions

Problem 36P

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When it purchased Sutton, Inc. on January 1, 20X1, Pavin Corporation issued 500,000 shares of its $5 par voting common stock. On that date the fair value of those shares totaled $4,200,000. Related to the acquisition, Pavin had payments to the attorneys and accountants of $200,000, and stock issuance fees of $100,000. Immediately prior to the purchase, the equity sections of the two firms appeared as follows: Pavin Sutton Common stock $ 4,000,000 $ 700,000 Paid-in capital in excess of par 7,500,000 900,000 Retained earnings 5,500,000 500,000 Total $17,000,000 $2,100,000 Immediately after the purchase, the consolidated balance sheet should report retained earnings of: a. $6,000,000 b. $5,800,000 c. $5,500,000 d. $5,300,000
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