Question

McGuire Company acquired 100 percent of the voting common shares of Able Corporation by issuing bonds with a par value and fair value of $150,000. Immediately prior to the acquisition, McGuire reported total assets of $500,000, liabilities of $280,000, and stockholders’ equity of $220,000. At that date, Able reported total assets of $400,000, liabilities of $250,000, and stockholders' equity of $150,000. Included in Able’s liabilities was an account payable to McGuire in the amount of $20,000, which McGuire included in its accounts receivable. Based on the preceding information, what amount of total assets did McGuire report in its balance sheet immediately after the acquisition?

Answer 1

Answer: $650,000

Step-by-step explanation:

Given that,

Fair and par value of issued bonds = $150,000

Prior acquisition, McGuire reported

Total assets = $500,000

Liabilities = $280,000

Stockholders’ equity = $220,000

At that date, Able reported

Total assets = $400,000

Liabilities = $250,000

Stockholders’ equity = $150,000

Account payable to McGuire = $20,000

Total assets reported by McGuire after acquisition:

= Total assets + Fair value of investment

= $500,000 + $150,000

= $650,000