PART TWO-OBJECTIVE QUESTIONS (30 POINTS) A) Internal Expansion (6 points) P S Present Corporation established Surprise Company as a wholly owned subsidiary. Present reported the following balance sheet accounts immediately before and after it transferred assets and accounts payable to Surprise Company in exchange for 4,000 shares of $15 par value common stock having a FMV of $20. Account Cash Accounts Receivable Allowance for Doubtful Accounts- Inventory Investment in Scissor Co. Land Depreciable Assets Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Retained Earnings Required B. (BY Cost Amount Reported Before Transfer After Transfer - $60,000 $40,000 95,000 56,000 10,000 8,000 50,000 36,000 2 35,000 27,000 200,000 130,000 - $95,000 33 62,000 60,000 $33,000 20,000 39,000 2000 M1000V 18,000 $0,000 33,000 271000 100,000 100,000 100,000 100,000 75,000 75,000 Cost Questions 1. What was Present's book value of the total assets transferred to Surprise? 6. 2. 1060 4000 1100 33," What amount should Present report as its investment in Surprise-after the transfer? 210 3. What was the amount of change (increase or decrease) in total assets of Present due to the transfer of assets and accounts payable? What change did the transfer of assets and accounts payable have on the abunt of shares outstanding in the consolidated balance sheet? No change. 5. What amount did Surprise record as additional paid-in capital upon issuance of the common stock? Does internal expansion constitute a business combination? (Use Y for Yes and N for No Investment Cost -Accumulated. Asset-libitis - Acc.- 98 -27 21,000.. I.I Ads CS-inves 33 60-89. 2 60,000 29