Multiple-Choice Questions on Balance Sheet Consolidation
Top Corporation acquired 100 percent of Sun Corporation’s common stock on December 31, 20X2. Balance sheet data for the two companies immediately following the acquisition follow:
Item | Top Corporation | Sun Corporation |
Cash | $ 49,000 | $ 30,000 |
Accounts Receivable | 110,000 | 45,000 |
Inventory | 130,000 | 70,000 |
Land | 80,000 | 25,000 |
Buildings and Equipment | 500,000 | 400,000 |
Less: Accumulated Depreciation | (223,000) | (165,000) |
Investment in Sun Corporation Stock | 198,000 |
|
Total Assets | $844,000 | $405,000 |
Accounts Payable | $ 61,500 | $ 28,000 |
Taxes Payable | 95,000 | 37,000 |
Bonds Payable | 280,000 | 200,000 |
Common Stock | 150,000 | 50,000 |
Retained Earnings | 257,500 | 90,000 |
Total Liabilities and Stockholders’ Equity | $844,000 | $405,000 |
At the date of the business combination, the book values of Sun’s net assets and liabilities approximated fair value except for inventory, which had a fair value of $85,000, and land, which had a fair value of $45,000.
Required
For each question, indicate the appropriate total that should appear in the consolidated balance sheet prepared immediately after the business combination.
1. What amount of inventory will be reported?
a.$70,000.
b.$130,000.
c.$200,000.
d.$215,000.
2. What amount of goodwill will be reported?
a.$0.
b.$23,000.
c.$43,000.
d.$58,000.
3. What amount of total assets will be reported?
a.$84,400.
b.$1,051,000.
c.$1,109,000.
d.$1,249,000.
4. What amount of total liabilities will be reported?
a.$265,000.
b.$436,500.
c.$701,500.
d.$1,249,000.
5. What amount of consolidated retained earnings will be reported?
a.$547,500.
b.$397,500.
c.$347,500.
d.$257,500.
6. What amount of total stockholders’ equity will be reported?
a.$407,500.
b.$547,500.
c.$844,000.
d.$1,249,000.
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