Big Guy Inc. purchased 80% of the outstanding voting shares of Humble Corp. for $360,000 on July
Question:
Big Guy Inc. purchased 80% of the outstanding voting shares of Humble Corp. for $360,000 on July 1, 2017. On that date, Humble Corp. had common shares and retained earnings worth $180,000 and $90,000, respectively. The equipment had a remaining useful life of 5 years from the date of acquisition. Humble's bonds mature on July 1, 2027. Both companies use straight line amortization, and no salvage value is assumed for assets. The trademark is assumed to have an indefinite useful life. Goodwill is tested annually for impairment.
The balance sheets of both companies, as well as Humble's fair market values on the date of acquisition are disclosed below.
1. The amount of depreciation expense appearing on Big Guy's June 30, 2020 consolidated income statement would be
Multiple Choice
a. $113,400
b. $113,720
c. $115,000
d. $116.280
2. Prev 3 of 8 Next What amount would appear as Big Guy's investment in Humble Corp. on its June 30, 2020 consolidated balance sheet?
Multiple Choice
a. $9.600.
b. $12,000
c. $360,000.
d. The Investment in Humble Account would not appear on the consolidated balance sheet
3. What amount of dividends would appear on Big Guy's consolidated statement of retained earnings as at June 30, 2020?
Multiple Choice
a. $2,000
b. $20,000
c. $21.600
d. $22.000
4. The amount of Current Liabilities appearing on Big Guy's consolidated balance sheet as at June 30, 2020 would be
Multiple Choice
a. $350,000
b. $630,000
c. $662,000.
d. $682,000
Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay