Can somebody please explain the calculation of combined capital stock under the acquisition method?
I’ve seen conflicting things in the books and mocks.
Thank you!
Capital stock is simply the addition of the initial parent’s stock and the number of shares issued to buy the target.
Additional paid in capital is simply the initial parent’s additional paid in, plus the fair value of the shares issued to acquire the target, minus the par vaue of those shares issued.
Retained earnings is the parent’s initial amount.
Where does the target’s retained earnings go? I don’t believe it goes into the new combined balance sheet, but I can’t believe it simply disappears.
Thanks