For the fiscal year ending December 31, how will consolidated net income of this business combination be determined if Hill acquires all of Loring’s stock?

a. Hill’s income for the past year plus Loring’s income for the past six months.

b. Hill’s income for the past year plus Loring’s income for the past year.

c. Hill’s income for the past six months plus Loring’s income for the past six months.

d. Hill’s income for the past six months plus Loring’s income for the past year.

Hill, Inc., obtains control over Loring, Inc., on July 1. The book value and fair value of Loring’s accounts on that date (prior to creating the combination) follow, along with the book value of Hill’s accounts:

Hill Book Values	Loring Book Values	Loring Fair Values
Revenues	$(250,000)	$(130,000)
Expenses	170,000	80,000
Retained earnings, 1/1	(130,000)	(150,000)
Cash and receivables	140,000	60,000	$ 60,000
Inventory	190,000	145,000	175,000
Patented technology (net)	230,000	180,000	200,000
Land	400,000	200,000	225,000
Buildings and equipment (net)	100,000	75,000	75,000
Liabilities	(540,000)	(360,000)	(350,000)
Common stock	(300,000)	(70,000)
Additional paid-in capital	(10,000)	(30,000)

Answer rating: 100% (QA)

Step 1 of 2 A In business combination or consolidation the revenues and expenses of the subsidiary ... View the full answer