Presented below is the balance sheet of Hal Company at January 1,2015: The balance sheet of Monty Company at January 1,2015 is below:
On January 1,2015,Monty Company acquired 100 percent of the outstanding common stock of Hal Company for $260 cash.What is the amount of Total Liabilities on the consolidated balance sheet immediately after the acquisition of Hal Company's stock? (Assume elimination entries are completed.)
A)$0
B)$380
C)$400
D)$640

Question

Presented below is the balance sheet of Hal Company at January 1,2015:   The balance sheet of Monty Company at January 1,2015 is below:
  On January 1,2015,Monty Company acquired 100 percent of the outstanding common stock of Hal Company for $260 cash.What is the amount of Total Liabilities on the consolidated balance sheet immediately after the acquisition of Hal Company's stock? (Assume elimination entries are completed.)
A)$0 
B)$380 
C)$400 
D)$640

Quizplus · Accepted Answer

After the acquisition of Hal Company's stock, Monty Company will prepare a consolidated balance sheet which will eliminate the intercompany transactions between the two companies. Since Hal Company was acquired for cash, Monty Company's cash balance will decrease by $260, while the non-cash assets and liabilities of Hal Company will be added to Monty Company's balance sheet. 
From the given balance sheets, the total liabilities of Hal Company and Monty Company are $400 and $240, respectively. Therefore, the total liabilities on the consolidated balance sheet will be $640 ($400 + $240). 
Thus, the correct answer is option D.

Presented Below Is the Balance Sheet of Hal Company at January