Final answer:
ABC Corporation would report the registration fees paid to issue new stock in a statutory merger as part of the issuance cost, which will be recorded as an expense on the income statement.
Step-by-step explanation:
When ABC Corporation issues new stock to the former shareholders of XYZ Company in a statutory merger, and must pay registration fees for issuing the new stock, these registration fees should be reported as an expense. Specifically, they will be reported on the income statement as part of the cost of issuing the new stock.
These costs are necessary for compliance with reporting requirements to government agencies, such as the Securities and Exchange Commission (SEC), and can include legal, accounting, and underwriting fees, among others.
It's important for ABC Corporation to account for these fees, as issuing and placing stock is an expensive process that includes the expertise of investment bankers and attorneys besides registration fees. The accounting treatment for such expenses aligns with the understanding that issuing stock is a way for a firm to raise financial capital for expansion, which is then used to further grow the company, whether through dividend payouts or reinvestments.