The following data pertains to questions
Parent and Sub Inc had the following balance sheets on December 31,2008: On January 1,2009 Parent purchased all of Sub Inc's Common Shares for $40,000 in cash.On that date,Sub's Current Assets and Fixed Assets were worth $26,000 and $54,000,respectively.Assuming that Consolidated Financial Statements were prepared on that date,answer the following:
-Assuming this Business Combination was to be accounted for under the Pooling of Interests Method,the Shareholder's Equity section of the Consolidated Balance Sheet would show what amount?
A)$121,000
B)$90,000
C)$19,000
D)$98,000

Question

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on December 31,2008:  On January 1,2009 Parent purchased all of Sub Inc's Common Shares for $40,000 in cash.On that date,Sub's Current Assets and Fixed Assets were worth $26,000 and $54,000,respectively.Assuming that Consolidated Financial Statements were prepared on that date,answer the following:
-Assuming this Business Combination was to be accounted for under the Pooling of Interests Method,the Shareholder's Equity section of the Consolidated Balance Sheet would show what amount?
A)$121,000 
B)$90,000 
C)$19,000 
D)$98,000

Quizplus · Accepted Answer

Under the pooling of interests method, the balance sheets of both the parent and subsidiary are combined without any adjustments to the carrying value of assets and liabilities. Therefore, the consolidated balance sheet would show the following:

- Current Assets: $26,000 (Sub's current assets) 
- Fixed Assets: $54,000 (Sub's fixed assets) 
- Cash: $40,000 (paid to purchase Sub's common shares) 
- Shareholder's Equity: $1,000 (Parent's common shares) + $20,000 (Sub's common shares) = $21,000

Thus, the total consolidated shareholder's equity would be $121,000 ($26,000 + $54,000 + $40,000 + $1,000 + $20,000). Therefore, the correct choice is A) $121,000.

The Following Data Pertains to Questions