D is corrent. The requirement is to determine the amount that should be recorded in Sayon’s additional paid-in capital account for the business combination. In a business combination accounted for as an acquisition, costs of registering securities and issuing common stock are netted against the proceeds and recorded in the additional paid-in capital account. Acquisition costs are expensed in the year the costs are incurred or the services are received, and the acquisition is recorded at the fair value of consideration given. Therefore, D is corrent because the amount recorded in the additional paid-in capital account is equal to $1,365,000 [(200,000 shares × $7 per share) – $35,000 registration and issue costs].
A is incorrect. Per ASC Topic 805 the finder’s and consultant’s fees should be expensed. The SEC registration costs should be netted against the additional paid-in capital account.
B is incorrect. Per ASC Topic 805 the finder’s and consultant’s fees should be expensed. The SEC registration costs should be netted against the additional paid-in capital account.
C is incorrect. Per ASC Topic 805 the finder’s and consultant’s fees should be expensed. The SEC registration costs should be netted against the additional paid-in capital account.
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