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Phillips Company acquires all of the outstanding stock of Sylvania Company by issuing 20,000 shares of its own $5 par value stock. The market value of its stock at the date of issuance was $50 a share. Also in conjunction with the acquisition Phillips incurred the following costs: $8,000 in finders fees, $12,000 in legal fees and $10,000 in stock issuance fees. What is the purchase price for this acquisition used to determine whether goodwill is present or not?

Respuesta :

Answer:

purchasing price will be based on par value = $1,00,000

Explanation:

Given data:

number of shares = 20,000

par value of stock = $5

Market value of stock is $50

Finders fees = $8000

legal fees = $12,000

stock issuance fees =$10,000

Paid capital is calculated at par value i.e. 20,000 * $5 = $ 1,00,000

Expenses like finders fees, legal fess and stock issuance fees will not be included in purchasing price. it is considered in miscellaneous expense

Hence purchasing price will be based on par value = $1,00,000

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