Question 3 (2.5 points) On January 1, 20X5, Power Company purchases 80% of the outstanding shares...

 

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Question 3 (2.5 points) On January 1, 20X5, Power Company purchases 80% of the outstanding shares of the Spencer Company for $2,500,000 in cash. On that date, Spencer Company had No Par Common Stock of $2,000,000 and Retained Earnings of $1,000,000. On January 1, 20X5, all of Spencer's identifiable assets and liabilities had fair values that were equal to their carrying values except for: • A building that had an estimated FV of $600,000 less that its carrying value; its remaining useful life was estimated to be 10 years; and • A long-term liability with a FV of $500,000 less than its carrying value; the liability matures on December 31, 20X12. • The book value (BV) of Building for Power and Spencer at date of acquisition was $1,000,000 and $2,000,000 respectively. The BV of Power's Common Shares just before the date of acquisition was $5,000,000. What amount would Power Company report on its consolidated SFP at date of acquisition for Common Shares? $5,800,000 None of these answers $7,500,000 $7,000,000 $5,000,000 Question 3 (2.5 points) On January 1, 20X5, Power Company purchases 80% of the outstanding shares of the Spencer Company for $2,500,000 in cash. On that date, Spencer Company had No Par Common Stock of $2,000,000 and Retained Earnings of $1,000,000. On January 1, 20X5, all of Spencer's identifiable assets and liabilities had fair values that were equal to their carrying values except for: • A building that had an estimated FV of $600,000 less that its carrying value; its remaining useful life was estimated to be 10 years; and • A long-term liability with a FV of $500,000 less than its carrying value; the liability matures on December 31, 20X12. • The book value (BV) of Building for Power and Spencer at date of acquisition was $1,000,000 and $2,000,000 respectively. The BV of Power's Common Shares just before the date of acquisition was $5,000,000. What amount would Power Company report on its consolidated SFP at date of acquisition for Common Shares? $5,800,000 None of these answers $7,500,000 $7,000,000 $5,000,000 Question 3 (2.5 points) On January 1, 20X5, Power Company purchases 80% of the outstanding shares of the Spencer Company for $2,500,000 in cash. On that date, Spencer Company had No Par Common Stock of $2,000,000 and Retained Earnings of $1,000,000. On January 1, 20X5, all of Spencer's identifiable assets and liabilities had fair values that were equal to their carrying values except for: • A building that had an estimated FV of $600,000 less that its carrying value; its remaining useful life was estimated to be 10 years; and • A long-term liability with a FV of $500,000 less than its carrying value; the liability matures on December 31, 20X12. • The book value (BV) of Building for Power and Spencer at date of acquisition was $1,000,000 and $2,000,000 respectively. The BV of Power's Common Shares just before the date of acquisition was $5,000,000. What amount would Power Company report on its consolidated SFP at date of acquisition for Common Shares? $5,800,000 None of these answers $7,500,000 $7,000,000 $5,000,000

Answer rating: 100% (QA)

The correct answer for the amount Power Company would report on its consolidated SFP at the date of acquisition for Common Shares is 7500000 Heres the ... View the full answer