The fair value of the expected number of shares to be

Reference no: EM13598897

Lauren Corporation acquired Sarah, Inc., on January 1, 2009, by issuing 13,000 shares of common stock with a $10 per share par value and a $23 market value. This transaction resulted in recording $62,000 of goodwill. Lauren also agreed to compensate Sarah's former owners for any difference if Lauren's stock is worth less than $23 on January 1, 2010. On January 1, 2010, Lauren issues an additional 3,000 shares to Sarah's former owners to honor the contingent consideration agreement. Under SFAS 141R, which of the following is true?

a. The fair value of the expected number of shares to be issued for the contingency increases the Goodwill account balance at the date of acquisition.
b. The Investment account balance is not affected, but the parent's Additional Paid-In Capital is reduced by the par value of the extra 3,000 shares when issued.

Reference no: EM13598897

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