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Correct answer is 26.2, but I thought it should be 18.2. Shouldn’t the OE account of 8M be eliminated at acquistion? I thought when you consolidate, you eliminated all stockholder equity accounts of the subsidiary. So then you have 16M + 2.5M + 600k – 900k= 18.2M
On January 1, 2011, Neel Corp. issued 400,000 additional shares of $10 par value common stock in exchange for all of Pym Corp.’s common stock. Immediately before this business combination, Neel’s stockholders’ equity was $16,000,000 and Pym’s stockholders’ equity was $8,000,000. On January 1, 2011, the fair value of Neel’s common stock was $20 per share, and the fair value of Pym’s net assets was $8,000,000. Neel’s net income for the year ended December 31, 2011, exclusive of any consideration of Pym, was $2,500,000. Pym’s net income for the year ended December 31, 2011, was $600,000. During 2011 Neel paid dividends of $900,000. Neel had no business transactions with Pym in 2011.
Assuming that this business combination is appropriately accounted for as a business acquisition, consolidated stockholders’ equity at December 31, 2011, should be
A: $17,600,000
B: $18,200,000
C: $26,200,000
D: $27,100,000
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