Parent Company Inc Also Assume the Following Information: the Acquisition Was Accounted for Year

question 42

Multiple Choice

Parent Company Inc. successfully bids for Child Company Inc. in year X1. Parent Company Inc. has purchased all of Child's shares outstanding for $8,500. Following are excerpts from both companies' financial statements for year X1, prior to the acquisition.
$\begin{array} { lr r } &\text { Parent Company Inc.}& \text { Child Company Inc. }\\\text { Total assets}&\$ 37,234 &\$ 5,379\\\\\text { Total liabilities } & \$ 23,467 & \$ 3,764 \\ \text { Total shareholders' equity } & \$ 13,767 & \$ 1,615 \\ \text { Total liabilities and shareholders' equity } & \$ 37,234 & \$ 5,379 \end{array}$
Also assume the following information: the acquisition was accounted for using the purchase method. $1,500 of the excess price relates to depreciable assets, and those assets have an additional useful life of 10 years at the time of the acquisition. Parent Company Inc. uses the straight line depreciation method and has a 34% tax rate. The combined net income for both companies for year X2 (excluding any expenses that need to be recorded as a result of the purchase method accounting for the merger) was $1,560.
-What would be the net income in the consolidated income statement for year X2 assuming any excess purchase price relates to goodwill, and goodwill was found to be impaired by $830?

• A)$1,461
• B)$1,560
• C)$1,012.2
• D)$730

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Definitions:

Emerging Adulthood

A phase of the life span between adolescence and full-fledged adulthood, typically ranging from ages 18 to 29.

Postformal Reasoning

A stage of cognitive development beyond Piaget's formal operational stage, where individuals are able to think in more complex, flexible, and integrated ways, considering multiple perspectives.

Moratorium

An adolescent’s choice of a socially acceptable way to postpone making identity-achievement decisions. Going to college is a common example.

Multiple Perspectives

The consideration of different viewpoints, interpretations, or approaches towards understanding a particular situation or problem.