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Parent and Sub Inc had the following balance sheets on July 31,2006: Yours Inc's Book Values were equal to their Fair Values on the date of acquisition,with the exception of Yours' Plant and Equipment,which was worth $100,000.
-What would be the balance in Yours Inc's Retained Earnings Account after the Pooling of Interests in Question 29 has taken place?
A)$200,000
B)$188,000
C)$120,000
D)$100,000

Question

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on July 31,2006:  Yours Inc's Book Values were equal to their Fair Values on the date of acquisition,with the exception of Yours' Plant and Equipment,which was worth $100,000.
-What would be the balance in Yours Inc's Retained Earnings Account after the Pooling of Interests in Question 29 has taken place?
A)$200,000 
B)$188,000 
C)$120,000 
D)$100,000

Quizplus · Accepted Answer

To calculate the balance in Yours Inc's Retained Earnings Account after the Pooling of Interests, we need to subtract the Fair Value of the identifiable net assets acquired from the book value of Sub Inc's Retained Earnings. 
Identifiable net assets acquired = 
- Cash and Marketable Securities: $200,000
- Accounts Receivable: $100,000
- Inventories: $400,000
- Plant and Equipment: $600,000 (since its fair value is $100,000 more than its book value)
Total identifiable net assets acquired = $1,300,000
Sub Inc's Retained Earnings = $1,488,000
Therefore, Yours Inc's Retained Earnings Account after the Pooling of Interests would be:
$1,488,000 - $1,300,000 = $188,000 (option B)

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