Power Corporation acquired 70 percent of Silk Corporation’s common stock on December 31, 20x2. Balance sheet datafor the two companies immediately following acquisition follow:1. What amount of inventory will be reported?A. P 179,000 C. P 210,500B. P 200,000 D. P 215,0002. What amount of goodwill will be reportedA. P 0 C. P 40,000B. P 28,000 D. P 52,0003. What amount of total assets will be reported?A. P 1,081,000 C. P 1,196,500B. P 1,121,000 D. P 1,231,50 Silk30,00045,000ItemPower44,000CashPPAccounts Receivable110,000Inventory130,00070,00080,000500,000Land25,000400,000Buildings and equipmentLess: Accumulated depreciationInvestment in Silk Corporation stockUNIT(223,000)150,500P 791,500(165,000)Total AssetsP 405,000Accounts payableTaxes payableBonds payable61,50095,000280,00028,00037,000200,00050,00090,000Common stock150,000Retained earningsTotal Liabilities and Stockholders’ Equity205,000P 791,500P 405,000After the date of the business combination, the book value of Silk's net assets and liabilities approximated their fairvalue except for inventory, which had a fair value of P85,000, and land, which had a fair value of P45, 000. The fairvalue of the non-controlling interest was P64,500 on December 31, 20x2.For each of the question below, indicate the appropriate total that should appear in the consolidated balance sheetimmediately after the business combination on the basis of full-goodwill approach:

Goodwill is a fixed asset of the company which is created due to customer base, reputation, employee…

Answered: Power Corporation acquired 70 percent…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Power Corporation acquired 70 percent of Silk Corporation’s common stock on December 31, 20x2. Balance sheet data
for the two companies immediately following acquisition follow:

1. What amount of inventory will be reported?
A. P 179,000 C. P 210,500
B. P 200,000 D. P 215,000
2. What amount of goodwill will be reported
A. P 0 C. P 40,000
B. P 28,000 D. P 52,000
3. What amount of total assets will be reported?
A. P 1,081,000 C. P 1,196,500
B. P 1,121,000 D. P 1,231,50

Silk
30,000
45,000
Item
Power
44,000
Cash
P
P
Accounts Receivable
110,000
Inventory
130,000
70,000
80,000
500,000
Land
25,000
400,000
Buildings and equipment
Less: Accumulated depreciation
Investment in Silk Corporation stock
UNIT
(223,000)
150,500
P 791,500
(165,000)
Total Assets
P 405,000
Accounts payable
Taxes payable
Bonds payable
61,500
95,000
280,000
28,000
37,000
200,000
50,000
90,000
Common stock
150,000
Retained earnings
Total Liabilities and Stockholders’ Equity
205,000
P 791,500
P 405,000
After the date of the business combination, the book value of Silk's net assets and liabilities approximated their fair
value except for inventory, which had a fair value of P85,000, and land, which had a fair value of P45, 000. The fair
value of the non-controlling interest was P64,500 on December 31, 20x2.
For each of the question below, indicate the appropriate total that should appear in the consolidated balance sheet
immediately after the business combination on the basis of full-goodwill approach:

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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