Pickup Company acquired 100 percent of the voting common shares of Sedan Corporation by issuing bonds with a par value and fair value of $200,000.Immediately prior to the acquisition,Pickup reported total assets of $600,000,liabilities of $370,000,and stockholders' equity of $230,000.At that date,Sedan reported total assets of $500,000,liabilities of $300,000,and stockholders' equity of $200,000.Included in Sedan's liabilities was an account payable to Pickup in the amount of $50,000,which Pickup included in its accounts receivable.
-Based on the preceding information,what amount of total liabilities was reported in the consolidated balance sheet immediately after the acquisition?
A)$370,000
B)$670,000
C)$820,000
D)$870,000

Question

Quizplus · Accepted Answer

The consolidated liabilities are calculated by adding Pickup's liabilities ($370,000) and Sedan's liabilities ($300,000), then eliminating the intercompany payable/receivable of $50,000. Thus, $370,000 + $300,000 - $50,000 = $620,000. However, the bonds issued for the acquisition ($200,000) are also added to the liabilities, resulting in a total of $820,000.

Pickup Company Acquired 100 Percent of the Voting Common Shares