On January 1, 2021, Jay Company acquired all the outstanding ownership shares of Zee Company. In...
On January 1, 2021, Jay Company acquired all the outstanding ownership shares of Zee Company. In assessing Zee’s acquisition-date fair values, Jay concluded that the carrying value of Zee’s long-term debt (8-year remaining life) was less than its fair value by $16,600. At December 31, 2021, Zee Company’s accounts show interest expense of $13,950 and long-term debt of $310,000. What amounts of interest expense and long-term debt should appear on the December 31, 2021, consolidated financial statements of Jay and its subsidiary Zee?
| Interest expense | Long-term debt | |
| a. | $16,025 | $326,600 |
| b. | $16,025 | $324,525 |
| c. | $11,875 | $326,600 |
| d. | $11,875 | $324,525 |
Multiple Choice
-
Option D
-
Option A
-
Option C
-
Option B
Homework Answers
| Annual Amortization of Excess Debt | $ 2,075 | =16600/8 |
| Interest Expense on Consolidated financial statements | $ 16,025 | =13950+2075 |
| Long-term debt on Consolidated financial statements | $ 324,525 | =310000+16600-2075 |
| Correct answer is option B . | ||
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