On January 1, 2016, Pell Company purchased 90% of Sand Company for $240,000 cash
ID: 2421111 • Letter: O
Question
On January 1, 2016, Pell Company purchased 90% of Sand Company for $240,000 cash.Immediately after the acquisition the condensed balance sheets were as follows:
Pell
Sand
Current assets
$40,000
$80,000
Investment in Sand
240,000
Noncurrent assets
360,000
160,000
Total assets
$640,000
$240,000
Current liabilities
$120,000
$40,000
Long-term debt
200,000
-0-
Stockholders' equity
320,000
200,000
Total liabilities & stockholders' equity
$640,000
$240,000
Any difference between book value and the value implied by the purchase price relates to land.
On the consolidated balance sheet immediately after acquisition,
Reference: Ref 3-1
Investment in Sand would be:
Select one:
A. $213,333.
B. $266,667.
C. $240,000.
D. $0.
Pell
Sand
Current assets
$40,000
$80,000
Investment in Sand
240,000
Noncurrent assets
360,000
160,000
Total assets
$640,000
$240,000
Explanation / Answer
A