During its inception, Devon Company purchased land for $100,000 and a building for $180,000. After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsidiary, Regan Company, in exchange for 15,000 shares of Regan's $10 par value stock. Devon uses straight-line depreciation. Useful life for the building is 30 years, with zero residual value. An appraisal revealed that the building has a fair value of $200,000.
Q1. Based on the preceding information, Regan Company will report
1. additional paid-in capital of $150,000.
2. additional paid-in capital of $180,000.
3. additional paid-in capital of $162,000.
4. additional paid-in capital of $0.
2. Based on the information provided, what amount would be reported by Devon Company as investment in Regan Company common stock?
Student Response
1. $150,000
2. $330,000
3. $180,000
4. $312,000