Plant Company acquired all of Sprout Corporation's stock on January 1,20X6 for $150,000 cash.On December 31,20X8,the trial balances of the two companies were as follows:
Sprout Corporation reported retained earnings of $75,000 at the date of acquisition.The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition.At December 31,20X8,Sprout owed Plant $4,000 for services provided.
-Based on the preceding information,what amount of total liabilities will be reported in the consolidated balance sheet for 20X8?
A)$225,000
B)$221,000
C)$217,000
D)$137,000

Question

Plant Company acquired all of Sprout Corporation's stock on January 1,20X6 for $150,000 cash.On December 31,20X8,the trial balances of the two companies were as follows:
  Sprout Corporation reported retained earnings of $75,000 at the date of acquisition.The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition.At December 31,20X8,Sprout owed Plant $4,000 for services provided.
-Based on the preceding information,what amount of total liabilities will be reported in the consolidated balance sheet for 20X8?
A)$225,000 
B)$221,000 
C)$217,000 
D)$137,000

Quizplus · Accepted Answer

To calculate the total liabilities in the consolidated balance sheet, we need to combine the liabilities of both companies.

From the trial balances, we can see that Sprout Corporation has total liabilities of $24,000 ($6,000 + $18,000) and Plant Company has total liabilities of $197,000 ($170,000 + $27,000).

We also know that Sprout owes Plant $4,000 for services provided.

Therefore, the total liabilities in the consolidated balance sheet would be:

$24,000 (Sprout's liabilities) + $197,000 (Plant's liabilities) + $4,000 (amount owed by Sprout to Plant) = $225,000

So the correct answer is B) $221,000.

Plant Company Acquired All of Sprout Corporation's Stock on January