Question 7 10 points Save Ans On January 1.2016. P Company and S Company had con

Question

Question 7 10 points Save Ans On January 1.2016. P Company and S Company had condensed balanced sheets as follows $ 210.000 279.000 5480.000 S 90,000 150,000 240000 480,000 S 60.000 120.000 5180 000 30,000 Current assets Noncurrent assets Total assets Current liabilities Long-term debt Stock holders equity Total liabilities &stockholders;' equity 150.009 180,000 On January 2, 2016 p borrowed S 180000 and used the proceeds to purchase 90% of the outstanding common stock of S This debt is payable in 10 pice elates to iand.al payments, plus interest starting December 30. 2013. Any difference between book value and the value implied by the purchase On P's January 2, 2016 consolidated balance sheet Reference Ref 3 Noncurrent assets should be A $408,000 B.5390,000. ? ?. s440,000. D.$402.000.

Explanation / Answer

Solution:

Book value of S Corporation = Total Assets - Liabilities = $180,000 - $30,000 = $50,000

Purchase price of 90% common stock of S = $180,000

Fair value of S corporation = $180,000 / 90 % = $200,000

Value of land = Fair value of S corporation - Book value of S corporation = $200,000 - $150,000 = $50,000

Therefore

Consolidated non current assets in consolidated balance sheet = $270,000 + $120,000 + $50,000 = $440,000

Hence option C is correct.

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