Question

Pecos company acquired 100 percent of suaro's outstanding stock for 1,450,000 cash on January 1, 2014. What was the balance sheet of suaro at the acquisition date?

1) Cash: 37,000, Liabilities: (422,000), Receivables: 82,000, Inventory: 149,000, Common Stock: (350,000), Land: 90,000, Retained Earnings: (126,000), Equipment (net): 225,000, Software: 315,000
2) Cash: 37,000, Liabilities: (422,000), Receivables: 82,000, Inventory: 149,000, Common Stock: (350,000), Land: 90,000, Retained Earnings: (126,000), Equipment (net): 225,000, Software: 415,000
3) Cash: 37,000, Liabilities: (422,000), Receivables: 82,000, Inventory: 149,000, Common Stock: (350,000), Land: 170,000, Retained Earnings: (126,000), Equipment (net): 225,000, Software: 315,000
4) Cash: 37,000, Liabilities: (422,000), Receivables: 82,000, Inventory: 149,000, Common Stock: (350,000), Land: 170,000, Retained Earnings: (126,000), Equipment (net): 225,000, Software: 415,000

Answer 1

The correct balance sheet of Suaor at the time of acquisition by Pecos Company cannot be determined without additional information regarding the fair values of Suaor's assets and liabilities on the acquisition date.

Step-by-step explanation:

The student is asking about the balance sheet of a company, Suaor, at the point it was acquired by another company, Pecos. According to the scenario, Pecos Company acquired 100 percent of Suaor's outstanding stock for 1,450,000 cash on January 1, 2014. The right balance sheet must be identified based on the figures provided. However, without knowing the exact values of Suaor's assets and liabilities at the time of acquisition, it is impossible to determine which of the provided balance sheets is correct solely from the given information.

To determine the correct balance sheet, one would typically reconcile the acquisition price with the fair value of the acquired company's net assets (assets minus liabilities). This process involves valuing each of the assets and liabilities at market value. If Suaor's net assets were valued at the purchase price of 1,450,000, this would suggest that the purchase was made at book value. However, without sufficient detail on fair values, this analysis cannot be completed.