Alpha Company acquired 100 percent of the voting common shares of Gamma Corporation by issuing bonds with a par value and fair value of $200,000. Immediately prior to the acquisition, Alpha reported total assets of $600,000, liabilities of $370,000, and stockholders' equity of $230,000. At that date, Gamma reported total assets of $500,000, liabilities of $300,000, and stockholders' equity of $200,000. Included in Gamma's liabilities was an account payable to Alpha in the amount of $50,000, which Alpha included in its accounts receivable.
-Based on the preceding information,what amount of total assets was reported in the consolidated balance sheet immediately after acquisition?
A) $600,000
B) $800,000
C) $1,050,000
D) $1,150,0000

Question

Quizplus · Accepted Answer

Total assets in the consolidated balance sheet immediately after acquisition will be obtained by adding the total assets of Alpha and Gamma. 
Alpha's total assets were $600,000 before the acquisition, and Gamma's total assets were $500,000 immediately prior to the acquisition. 
Since Alpha acquired all of Gamma's voting common shares, consolidation requires adding Gamma's assets to Alpha's assets. 
Therefore, the consolidated balance sheet immediately after acquisition will have a total of $1,100,000 ($600,000 + $500,000). 
Note that the account payable to Alpha will be eliminated in consolidation, as it represents a transaction between Alpha and Gamma, and the consolidated financial statements represent the financial position of the combined entity.

Alpha Company Acquired 100 Percent of the Voting Common Shares