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17 March, 16:00

Huge Co. issues 170,625 shares of common stock ($1 par value) to acquire Little Co. in a purchase business combination. The market value of Huge's common stock is $9. Consulting fees incurred in relationship to the purchase are $80,000. Issuance and registration costs for the common stock are $50,000. What should be recorded in Huge's additional paid-in capital account for this business combination?

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  1. 17 March, 17:14
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    Answer: additional paid-in capital account for this business combination is $1,315,000

    Explanation:

    Number of shares = 170,625 at $1 par value

    Market value = $9

    Consulting fee = $80,000

    Issuance and registration = $50,000

    Investment (170,625 * $9). 1,535,625. Dr.

    Consulting expenses 110,000. Dr.

    Additional paid in capital is given by;

    170,625 * ($9 - $1) - Issuance and registration fee

    = $1,365,000 - $50,000

    $1,315,000
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