5)Sonny has the following account balances as of January 1, 2018 before an acquisition transaction takes place. The fair value of Sonny\' Land and Buildings are $200,000 and $300,000, respectively. On January 1, 2018, Phillip Company issues 30,000 shares of its $10 par value ($25 fair value) common stock in exchange for all of the shares of Sonny\' common stock. Phillip paid $10,000 for costs to issue the new shares of stock. Before the acquisition, Phillip has $700,000 in its common stock account and $300,000 in its additional paid-in capital account. On January 1, 2018, what value is assigned to Phillip\'s investment account? A. $150,000. B. $300,000. C. $750,000. D. $760,000. E. $1,350,000. 6)Acquired in-process research and development is considered as A. an indefinite-lived asset subject to testing for impairment. B. a definite-lived asset subject to testing for impairment. C. an indefinite-lived asset subject to amortization. D. a definite-lived asset subject to amortization. E. a research and development expense at the date of acquisition. 7) Sonny has the following account balances as of January 1, 2018 before an acquisition transaction takes place. The fair value of Sonny\' Land and Buildings are $200,000 and $300,000, respectively. On January 1, 2018, Phillip Company issues 30,000 shares of its $10 par value ($25 fair value) common stock in exchange for all of the shares of Sonny\' common stock. Phillip paid $10,000 for costs to issue the new shares of stock. Before the acquisition, Phillip has $700,000 in its common stock account and $300,000 in its additional paid-in capital account. Immediately after the acquisition, what is the consolidated additional paid in capital? A. $500,000. B. $740,000. C. $750,000. D. $760,000. E. $940,000.Inventory$100,000Land400,000Buildings (net)500,000Common stock600,000Additional paid in capital200,000Retained Earnings200,000Revenues450,000Expenses250,000 Solution Part 5) The value assigned to Phillip\'s investment account is determined as below: Value Assigned to Philip\'s Investment Account = Number of Shares Issued*Fair Value Per Share Using the values provided in the question, we get, Value Assigned to Philip\'s Investment Accounton January 1 2008 = 30,000*25 = $750,000 (which is Option C) _____ Part 6) An indefinite-lived asset subject to testing for impairment. (which is Option A) _____ Explanation: As per the applicable accounting rules/standards, the value of in-process research and development is capitalized as an asset for the combined entity. It is treated as an intangible asset having an indefinite life and is subject to impairment. _____ Part 7) The value of consolidated additional paid in capital is arrived as below: Value of Consolidated Additional Paid in Capital = Current Balance in Phillip\'s Additional Paid- In Capital Account + Increase in Additional Paid in Capital on the Date of Acquisition Using the values provided in the question, we get, Value of Consolidated Additional Paid.

1. 5)Sonny has the following account balances as of January 1, 2018 before an acquisition
transaction takes place.
The fair value of Sonny' Land and Buildings are $200,000 and $300,000, respectively. On
January 1, 2018, Phillip Company issues 30,000 shares of its $10 par value ($25 fair value)
common stock in exchange for all of the shares of Sonny' common stock. Phillip paid $10,000
for costs to issue the new shares of stock. Before the acquisition, Phillip has $700,000 in its
common stock account and $300,000 in its additional paid-in capital account.
On January 1, 2018, what value is assigned to Phillip's investment account?
A. $150,000.
B. $300,000.
C. $750,000.
D. $760,000.
E. $1,350,000.
6)Acquired in-process research and development is considered as
A. an indefinite-lived asset subject to testing for impairment.
B. a definite-lived asset subject to testing for impairment.
C. an indefinite-lived asset subject to amortization.
D. a definite-lived asset subject to amortization.
E. a research and development expense at the date of acquisition.
7) Sonny has the following account balances as of January 1, 2018 before an acquisition
transaction takes place.
The fair value of Sonny' Land and Buildings are $200,000 and $300,000, respectively. On
January 1, 2018, Phillip Company issues 30,000 shares of its $10 par value ($25 fair value)
common stock in exchange for all of the shares of Sonny' common stock. Phillip paid $10,000
for costs to issue the new shares of stock. Before the acquisition, Phillip has $700,000 in its
common stock account and $300,000 in its additional paid-in capital account.
Immediately after the acquisition, what is the consolidated additional paid in capital?
A. $500,000.
B. $740,000.
C. $750,000.
D. $760,000.

2. E. $940,000.Inventory$100,000Land400,000Buildings (net)500,000Common
stock600,000Additional paid in capital200,000Retained
Earnings200,000Revenues450,000Expenses250,000
Solution
Part 5)
The value assigned to Phillip's investment account is determined as below:
Value Assigned to Philip's Investment Account = Number of Shares Issued*Fair Value Per
Share
Using the values provided in the question, we get,
Value Assigned to Philip's Investment Accounton January 1 2008 = 30,000*25 = $750,000
(which is Option C)
_____
Part 6)
An indefinite-lived asset subject to testing for impairment. (which is Option A)
_____
Explanation:
As per the applicable accounting rules/standards, the value of in-process research and
development is capitalized as an asset for the combined entity. It is treated as an intangible asset
having an indefinite life and is subject to impairment.
_____
Part 7)
The value of consolidated additional paid in capital is arrived as below:
Value of Consolidated Additional Paid in Capital = Current Balance in Phillip's Additional Paid-
In Capital Account + Increase in Additional Paid in Capital on the Date of Acquisition
Using the values provided in the question, we get,
Value of Consolidated Additional Paid in Capital = 300,000 + [30,000*(25 - 10) - 10,000] =
$740,000 (which is Option B)