Pendragon co. issues 200,000 shares of $5 par value common stock to acquiresquire co. in a business combination. the market value of pendragon’s common stock is$12. legal and consulting fees incurred in relationship to the combination are $110,000. direct registration and issuance costs for the common stock are $35,000. what should berecorded in pendragon’s additional paid­in capital (apic) for this business combination?
a, $1,545,000
b, $1,400,000
c, $1,365,000
d, $1,255,000

$ 1365000

Explanation:

Given:

Shares issued = 200000

Par value = $ 5

Market value = $ 12

Legal and consulting fees = $ 110000

Direct registration and issuance costs = $ 35,000

now,

Fair value of all the shares = 200000 × $ 12 = $ 2400000

Par value for all the shares = 200000 × $ 5 = $ 1000,000

thus, the additional capital paid = $ 2400000 - $ 1000000 = $ 1400000

Now,

Net additional capital paid = $ 1400000 - $ 35000 = $ 1365000

Since the legal and consulting fees are expenses, thus not deducted from the additional capital

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