Question

Company A purchased 100% of the outstanding common stock of Company B for $500,000 cash, and Company A incurred $50,000 in indirect acquisition costs. The FMV of the net assets of Company B was $400,000, and the BV of the net assets of Company B was $300,000. When Company A performs an initial consolidation, the remaining consolidated balance in “Investment in Company B” post-consolidation will be:

Question 6 options:

	a) $50,000
	b) $500,000
	c) $100,000
	d) $0

Company P purchased 100% of the outstanding common stock of Company S on 1/1/20 for $600,000 in cash and stock. Company P accounts for the income of Company S using the Cost Method, and during the year Company S reported Net Income of $100,000 and declared and paid dividends of $60,000. Assuming no other transaction between the two companies, the balance in the “Investment Income from Company S” on the books of Company P on 12/31/20 will be:

Question 9 options:

	a) $100,000
	b) $0
	c) $60,000
	d) $40,000

Answer 1

After completion of consolidation , there will be no balance in "Investment in subsidiary", because 100% stake is with our company representing a same and single entity

Question 6: d) $0

Question 9: b) $0