AInc. purchased 100% of B Inc.'s voting shares for cash. The Assets and Liabilities reported in the Consolidated Balance Sheet of A Inc. prepared on the date of acquisition will include:

Question

Quizplus · Accepted Answer

When consolidating financial statements, the acquiring company records the assets and liabilities of the acquired company at their fair market value, not their book value. Therefore, the consolidated balance sheet will include the book value of A's assets and liabilities (the acquiring company) plus the fair market value of B's assets and liabilities (the acquired company). Choice A is incorrect because it only includes the book value of both companies' assets and liabilities. Choice B and D are incorrect because they include the fair market value of A's assets and liabilities, which is not necessary when consolidating with a newly acquired company.

AInc Purchased 100% of B Inc