Scenario 3-1
Pedro Purchased 100% of the Common Stock of the Sanburn

question 30

Short Answer

Scenario 3-1
Pedro purchased 100% of the common stock of the Sanburn Company on January 1, 20X1, for $500,000. On that date, the stockholders' equity of Sanburn Company was $380,000. On the purchase date, inventory of Sanburn Company, which was sold during 20X1, was understated by $20,000. Any remaining excess of cost over book value is attributable to patent with a 20-year life. The reported income and dividends paid by Sanburn Company were as follows:
$\begin{array}{lrr} & 20 \mathrm{X} 1 & 20 \mathrm{X} 2 \\\text { Net income } & \$ 80,000 & \$ 90,000 \\\text { Dividends paid } & 10,000 & 10,000\end{array}$
-Refer to Scenario 3-1. Using the cost method, which of the following amounts are correct?

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Definitions:

Gene

A unit of heredity made up of DNA (or RNA in some viruses) that is responsible for passing characteristics from parents to offspring.

Chromosome

A thread-like structure of nucleic acids and protein found in the nucleus of most living cells, carrying genetic information in the form of genes.

Hereditary Transmission

The process by which genetic information is passed from parents to offspring through their genes.

Pituitary Gland

A small, pea-sized gland located at the base of the brain which plays a crucial role in regulating vital body functions and general wellbeing by secreting hormones.