Can anyone help me out with this one? Still not sure of the reasoning
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
The answer is C. It includes the subsidary's S/H equity in total S/H. However, i thought when the parent has total ownership of a sub, only the parent's S/H equity is reported. Thus, i chose A. Beginning S/H 16 mill + Net income 2.5 mill – dividends paid 900 k = 17.6 mill
FAR- PASSED (11/13)
REG- PASSED (2/14)
BEC- PASSED (5/14)
AUD- PASSED (8/14)
If it's important to you, you will find a way. If it isn't, you will find an excuse.
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