Xenon acquired 100% of Volt's net assets for $300,000. On the acquisition date, the fair value of the current assets and the net capital assets were $208,000 and $438,000 respectively. The fair value of the liabilities equalled their book value. On Xenon's statement of financial position, what is the total of its shareholders' equity? $\begin{array}{|l|r|r|}
\hline& \text { Xenon Co. } & \text { Volt Ltd. } \
\hline \text { Current assets } & \$ 480,000 & \$ 80,000 \
\hline \text { Net capital assets } & \underline{800,000} & \underline{480,000} \\hline & \$ 1,280,000 & \$ 560,000 \
\hline \text { Current liabilities } & \$ 336,000 & \$ 280,000 \
\hline \text { Long-term debt } & 160,000 & 96,000 \
\hline \text { Share capital } & 720,000 & 100,000 \\hline \text { Retained earnings } & -64,000 & \$ \underline{64,000} \
\hline & \$ 1,280,000 & \$ \underline{560,000} \
\hline
\end{array}$
A)$968,000
B)$184,000
C)$784,000
D)$1,084,000

Question

Xenon acquired 100% of Volt's net assets for $300,000. On the acquisition date, the fair value of the current assets and the net capital assets were $208,000 and $438,000 respectively. The fair value of the liabilities equalled their book value. On Xenon's statement of financial position, what is the total of its shareholders' equity? $\begin{array}{|l|r|r|} 
\hline& \text { Xenon Co. } & \text { Volt Ltd. } \
\hline \text { Current assets } & \$ 480,000 & \$ 80,000 \
\hline \text { Net capital assets } & \underline{800,000} & \underline{480,000} \\hline & \$ 1,280,000 & \$ 560,000 \
\hline \text { Current liabilities } & \$ 336,000 & \$ 280,000 \
\hline \text { Long-term debt } & 160,000 & 96,000 \
\hline \text { Share capital } & 720,000 & 100,000 \\hline \text { Retained earnings } & -64,000 & \$ \underline{64,000} \
\hline & \$ 1,280,000 & \$ \underline{560,000} \
\hline
\end{array}$
A)$968,000
B)$184,000
C)$784,000
D)$1,084,000

Quizplus · Accepted Answer

The total shareholders' equity of Xenon after the acquisition is calculated by adding the fair value of the acquired net assets ($208,000 + $438,000 - $280,000 - $96,000 = $270,000) to Xenon's original equity ($720,000 - $64,000 = $656,000), resulting in $926,000. However, since Xenon paid $300,000 for Volt's net assets, the excess payment over the net assets' fair value ($300,000 - $270,000 = $30,000) is considered goodwill. Therefore, the total shareholders' equity is $656,000 + $270,000 + $30,000 = $784,000.

Xenon Acquired 100% of Volt's Net Assets for $300,000 A)$968,000 B)$184,000 C)$784,000 D)$1,084,000

Xenon Acquired 100% of Volt's Net Assets for $300,000 A)$968,000
B)$184,000
C)$784,000
D)$1,084,000