10 peints On January 1,2016 P Company and 5 Company had condensed bialance sheet

Question

10 peints On January 1,2016 P Company and 5 Company had condensed bialance sheets as ollowws Nonourrent asets 29000 40.000 Curent labies Long term 120.000 requity 240.009 O, january 2. 2016, borrowed $240000 and used the proceeds to purchase 90%ofth On Ps january 2, 2015 consolidated balance sheet Current lablites should b e outsw drig common ttock of S. This det is payable in ?0 equal annual princpal pare ents pus interest startng December 30, 2016 vaue and the value impled by the purchase price reilates so land dfference $120.000 C$10000 D.1200 000

Explanation / Answer

Solution:

Loan taken by P to acquire 90% common stock of S = $240,000

Loan amount due with in 1 year (Current portion) = $240,000 * 10% = $24,000

Current liabilities to be reported in consolidated balance sheet of P = Current liabilities of P + Current liabilities for S + Current portion of borrowings

= $120,000 + $40,000 + $24,000 = $184,000

Hence option A is correct.

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