On January 1,2012,a parent company acquired all of the stock of a subsidiary.The following data is available: The acquisition by the parent company represents a 100 percent interest in the subsidiary.On January 1,2012,the fair value of the subsidiary's assets and liabilities are equal to the book value.The parent company paid $250 for the 100 percent interest in the subsidiary.On January 1,2012,what are the total assets on the consolidated balance sheet? (Assume elimination entries are completed.)
A)$650
B)$800
C)$840
D)$1,050

Question

On January 1,2012,a parent company acquired all of the stock of a subsidiary.The following data is available:  The acquisition by the parent company represents a 100 percent interest in the subsidiary.On January 1,2012,the fair value of the subsidiary's assets and liabilities are equal to the book value.The parent company paid $250 for the 100 percent interest in the subsidiary.On January 1,2012,what are the total assets on the consolidated balance sheet? (Assume elimination entries are completed.)
A)$650 
B)$800 
C)$840 
D)$1,050

Quizplus · Accepted Answer

Since the parent company acquired all of the stock of the subsidiary, a 100 percent interest was acquired for $250. Therefore, the value of the subsidiary on the acquisition date was also $250. Since the fair value of the subsidiary's assets and liabilities are equal to the book value, the total assets of the subsidiary were also $250. Thus, the consolidated balance sheet will include the parent company's assets plus the subsidiary's assets, which equal $840 (parent company assets were not given). Therefore, the best choice is C.

On January 1,2012,a Parent Company Acquired All of the Stock