Parent and Sub Inc. had the following balance sheets on December 31, 2019: Parent Sub Current Assets $ 60 , 000 $ 10 , 000 Fixed Assets (net) $ 100 , 000 $ 60 , 000 Total Assets $ 160 , 000 $ 70 , 000 Current Liabilities $ 42 , 000 $ 35 , 000 Bonds Payable $ 20 , 000 $ 12 , 000 Common Shares $ 90 , 000 $ 12 , 000 Retained Earnings $ 8 , 000 $ 11 , 000 Total Liabilities and Equity $ 160 , 000 $ 70 , 000 \begin{array}{|l|r|r|}\hline & ext { Parent } & ext { Sub } \\hline ext { Current Assets } & \$ 60,000 & \$ 10,000 \\hline ext { Fixed Assets (net) } & \$ 100,000 & \$ 60,000 \\hline ext { Total Assets } & \$ 160,000 & \$ 70,000 \\hline ext { Current Liabilities } & \$ 42,000 & \$ 35,000 \\hline ext { Bonds Payable } & \$ 20,000 & \$ 12,000 \\hline ext { Common Shares } & \$ 90,000 & \$ 12,000 \\hline ext { Retained Earnings } & \$ 8,000 & \$ 11,000 \\hline ext { Total Liabilities and Equity } & \$ 160,000 & \$ 70,000 \\hline\end{array} Current Assets Fixed Assets (net) Total Assets Current Liabilities Bonds Payable Common Shares Retained Earnings Total Liabilities and Equity Parent $60 , 000 $100 , 000 $160 , 000 $42 , 000 $20 , 000 $90 , 000 $8 , 000 $160 , 000 Sub $10 , 000 $60 , 000 $70 , 000 $35 , 000 $12 , 000 $12 , 000 $11 , 000 $70 , 000 On January 1, 2020, Parent purchased all of Sub Inc.'s Common Shares for $40,000 in cash. On that date, Sub's Current Assets and Fixed Assets were worth $26,000 and $54,000, respectively. Assuming that Consolidated Financial Statements were prepared on that date, answer the following:The Fixed Assets of the combined entity should be valued at:A) $70,000B) $120,000C) $154,000D) $160,000

Question

Parent and Sub Inc. had the following balance sheets on December 31, 2019:    Parent   Sub   Current Assets  $ 60 , 000 $ 10 , 000  Fixed Assets (net)   $ 100 , 000 $ 60 , 000  Total Assets  $ 160 , 000 $ 70 , 000  Current Liabilities  $ 42 , 000 $ 35 , 000  Bonds Payable  $ 20 , 000 $ 12 , 000  Common Shares  $ 90 , 000 $ 12 , 000  Retained Earnings  $ 8 , 000 $ 11 , 000  Total Liabilities and Equity  $ 160 , 000 $ 70 , 000 \begin{array}{|l|r|r|}\hline  &  	ext { Parent }  &  	ext { Sub } \\hline 	ext { Current Assets }  &  \$ 60,000  &  \$ 10,000 \\hline 	ext { Fixed Assets (net)  }  &  \$ 100,000  &  \$ 60,000 \\hline 	ext { Total Assets }  &  \$ 160,000  &  \$ 70,000 \\hline 	ext { Current Liabilities }  &  \$ 42,000  &  \$ 35,000 \\hline 	ext { Bonds Payable }  &  \$ 20,000  &  \$ 12,000 \\hline 	ext { Common Shares }  &  \$ 90,000  &  \$ 12,000 \\hline 	ext { Retained Earnings }  &  \$ 8,000  &  \$ 11,000 \\hline 	ext { Total Liabilities and Equity }  &  \$ 160,000  &  \$ 70,000 \\hline\end{array}  Current Assets   Fixed Assets (net)    Total Assets   Current Liabilities   Bonds Payable   Common Shares   Retained Earnings   Total Liabilities and Equity  ​  Parent  $60 , 000 $100 , 000 $160 , 000 $42 , 000 $20 , 000 $90 , 000 $8 , 000 $160 , 000 ​  Sub  $10 , 000 $60 , 000 $70 , 000 $35 , 000 $12 , 000 $12 , 000 $11 , 000 $70 , 000 ​ ​   On January 1, 2020, Parent purchased all of Sub Inc.'s Common Shares for $40,000 in cash. On that date, Sub's Current Assets and Fixed Assets were worth $26,000 and $54,000, respectively. Assuming that Consolidated Financial Statements were prepared on that date, answer the following:The Fixed Assets of the combined entity should be valued at:A)  $70,000B)  $120,000C)  $154,000D)  $160,000

Gopika kalarikkal · Accepted Answer

Final Answer : C, Explanation :  The Fixed Assets of the combined entity should be valued at their book values since the purchase of Sub Inc.'s shares does not directly affect the valuation of the assets on the consolidated balance sheet. Therefore, the combined Fixed Assets are $100,000 (Parent) + $60,000 (Sub) = $160,000.

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