Prime Company acquired 100 percent of the voting common shares of Standard Video Corporation,its bitter rival,by issuing bonds with a par value and fair value of $150,000.Immediately prior to the acquisition,Prime reported total assets of $500,000,liabilities of $280,000,and stockholders' equity of $220,000.At that date,Standard Video reported total assets of $400,000,liabilities of $250,000,and stockholders' equity of $150,000.Included in Standard's liabilities was an account payable to Prime in the amount of $20,000,which Prime included in its accounts receivable.
-Based on the preceding information,what amount of total assets did Prime report in its separate balance sheet immediately after the acquisition before any consolidation with Standard Video?
A)$500,000
B)$650,000
C)$750,000
D)$900,000

Question

Quizplus · Accepted Answer

After acquiring Standard Video, Prime Company's total assets would include their pre-acquisition assets plus the fair value of the bonds issued, which is $150,000.

Total assets after acquisition = Prime's pre-acquisition total assets + fair value of bonds issued

Total assets after acquisition = $500,000 + $150,000

Total assets after acquisition = $650,000

Therefore, the correct answer is choice (B).

Prime Company Acquired 100 Percent of the Voting Common Shares