On January 1,2009,Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash.The fair value of the noncontrolling interest at that date was determined to be $40,000.Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:
At the date of the business combination,the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory,which had a fair value of $45,000,and land,which had a fair value of $60,000.

-Based on the preceding information,what amount of total liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?

Question

On January 1,2009,Gulliver Corporation acquired 80 percent of Sea-Gull Company's common stock for $160,000 cash.The fair value of the noncontrolling interest at that date was determined to be $40,000.Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:
At the date of the business combination,the book values of Sea-Gull's net assets and liabilities approximated fair value except for inventory,which had a fair value of $45,000,and land,which had a fair value of $60,000.
 
-Based on the preceding information,what amount of total liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?

Quizplus · Accepted Answer

The total liabilities of Sea-Gull Company as of the acquisition date were $100,000 ($50,000 current liabilities and $50,000 long-term debt). Since Gulliver Corporation only acquired 80% of Sea-Gull Company, only 80% of the total liabilities ($80,000) are included in the consolidated balance sheet. Therefore, the total liabilities reported in the consolidated balance sheet immediately after the business combination would be $265,000 ($80,000 + $185,000 - $40,000).

On January 1,2009,Gulliver Corporation Acquired 80 Percent of Sea-Gull Company's