Question

Public Equity Corporation acquired Lenore Company through an exchange of common shares. All of Lenore's assets and liabilities were immediately transferred to Public Equity. Public's common stock was trading at $20 per share at the time of exchange. Following selected information is also available.

B4 acquis After acquis
PV shares o/s $200,000 $250,000
Add'l PIC $350,000 $550,000

) Based on the preceding information, what number of shares was issued at the time of the exchange?
A) 5,000
B) 17,500
C) 12,500
D) 10,000

Answer 1

The number of shares issued by Public Equity Corporation in the acquisition of Lenore Company was calculated to be 2,500, based on the value increase of outstanding shares and the share price at the time of exchange.

Step-by-step explanation:

To calculate the number of shares issued during the acquisition of Lenore Company by Public Equity Corporation, we compare the change in Public's common shares outstanding and additional paid-in capital (PIC) before and after the acquisition. The shares outstanding increased from $200,000 to $250,000, which represents an increase of $50,000 in the value of the shares outstanding. As Public's stock was trading at $20 per share, we divide the $50,000 increase by the share price to find the number of shares issued: $50,000 / $20 = 2,500 shares. Therefore, the number of shares issued at the time of the exchange is 2,500, which is not listed as an option in the provided choices, indicating a potential error in the question or given options.