Question

On January 2, 2020, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. Shares of Spraz are not actively traded on the market. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2020. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. What amount represents consolidated current assets at January 2, 2020

Answer 1

$148,000

Step-by-step explanation:

The Excess consideration paid can be calculated as under:

Fair Value of Company ($84,000 / 80%) $105,000

Less Book value (Equity) ($70,000)

Excess Consideration $35,000

Now we have to calculate the consolidated current asset, which is given as under:

60% of Excess Consideration ($35,000 * 60%) $21,000

Current Assets of Palk $99,000

Current Assets of Spraz $28,000

Consolidated Current Assets $148,000