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.Hal Company generated net income of $30 during the year ended December 31,2015.There were no intercompany sales.What is the balance in the Investment in Hal Company account on December 31,2015 before elimination entries are prepared?
A)$0
B)$30
C)$230
D)$290

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.Hal Company generated net income of $30 during the year ended December 31,2015.There were no intercompany sales.What is the balance in the Investment in Hal Company account on December 31,2015 before elimination entries are prepared?
A)$0 
B)$30 
C)$230 
D)$290

Quizplus · Accepted Answer

The Investment in Hal Company account will be affected by the net income of Hal Company and the cost of acquiring the company. Since there were no intercompany sales, there will be no elimination entries required. Therefore, the balance in the Investment in Hal Company account on December 31, 2015 will be the initial cost of $260 plus the net income of $30, which totals $290. Thus, option D is the correct answer.

Presented Below Is the Balance Sheet of Hal Company at January