Question
Please explain the answers. On January 1, 20X8, Polo Corporation acquired 75 percent of Stallion Company's voting common stock for $300,000. At the time of
Please explain the answers.
On January 1, 20X8, Polo Corporation acquired 75 percent of Stallion Company's voting common stock for $300,000. At the time of the combination, Stallion reported common stock outstanding of $200,000 and retained earnings of $150,000, and the fair value of the noncontrolling interest was $100,000. The book value of Stallion's net assets approximated market value except for patents that had a market value of $50,000 more than their book value. The patents had a remaining economic life of ten years at the date of the business combination. Stallion reported net income of $40,000 and paid dividends of $10,000 during 20X8.
Based on the preceding information, what balance will Polo report as its investment in Stallion at December 31, 20X8, assuming Polo uses the equity method in accounting for its investment?
$317,500 |
$318,750 |
$330,000 |
$326,250 Pail, Inc. holds 100 percent of the common stock of Shovel Company, an investment acquired for $680,000. Immediately following the combination, Pail's net assets have a book value of $1,150,000 and a fair value of $1,390,000. The book value and the fair value of Shovel's net assets on the date of combination are $400,000 and $550,000, respectively. Immediately following the combination, a consolidated balance sheet is prepared. Based on the information given above, what will be the amount of net assets reported in the consolidated balance sheet, prepared immediately following the combination?
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