Moon Company purchased 80% of Star Ltd on January 1, 2011.At that time the values for the inventory for each company were as follows: $\begin{array}{lrr}
&\text { Moon } & {\text { Star }} \
\text { Book value } & \$ 400,000 & \$ 200,000 \
\text { Market value } & 450,000 & 240,000
\end{array}$
The value of inventory on the consolidated balance sheet as at the date of acquisition would be:

Question

Quizplus · Accepted Answer

The consolidated inventory value is the sum of the market values of both companies' inventories: $450,000 (Moon) + $240,000 (Star) = $690,000. However, since Moon owns 80% of Star, the consolidated inventory includes 80% of Star's market value: $450,000 + (80% of $240,000) = $450,000 + $192,000 = $642,000. But since the question asks for the value at the date of acquisition, the correct value should be the full market value of both inventories, which is $690,000. However, the closest option to this calculation is $640,000, which seems to be a mistake in the options provided.

Moon Company Purchased 80% of Star Ltd on January 1