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Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement
Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2013, prepared immediately before this transaction. Receivables & inventories Land Property & equipment Total assets Liabilities Common stock ($2 par) Additional paid-in capital Retained earnings Total liabilities & equity Book Values Investor Investee $250,000 $125,000 500,000 250,000 562,500 250,000 $1,312,500 $625,000 $375,000 $200,000 50,000 25,000 700,000 375,000 187,500 25,000 $1,312,500 $625,000 Compute the investment account (market value equals book value) Assume that the fair values of the investee's net assets approximated the recorded book values of the investee's net assets, and the transaction resulted in no recorded goodwill or bargain purchase gain. What is the balance in the pre-consolidation investment in investee account on the investor company's books on January 1, 2013, immediately after the acquisition of the investee company voting common stock? A. Not enough information provided B. $25,000 C. $425,000 D. $375,000
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