Presented Below Are the Balance Sheets of Monty Company and Hall

question 47

Multiple Choice

Presented below are the balance sheets of Monty Company and Hall Company at January 1, 20X6: $\begin{array}{lrlr}\text { Hall Company } && \text { Monty Company } \\\text { Balance Sheet } && \text { Balance Sheet } \\\text { January } 1,20 \mathrm{X} 6 && \text { January } 1,20 \mathrm{X} 6\\\text { Cash } & \$ 100 & \text { Cash } & \$ 400 \\\text { Net fixed assets } & 400 & \text { Net fixed assets } & 380 \\\text { Total assets } & \$ 500 & \text { Total assets } & \$ 780\\\text { Accounts payable } & \$ 20 &\text { Accounts payable }&\$120\\\text { Long-term bonds }&&\text { Long-term bonds }\\\text { payable } & 220 & \text { payable } & 280 \\\text { Stockholders' equity } & \underline{260} & \text { Stockholders' equity } & \underline{380}\\\text { Total liabilities and } & - & \text { Total liabilities and } & \\\text { stockholders' equity } & \$ 500 & \text { stockholders' equity } & \$ 780\end{array}$ On January 1, 20X6, Monty Company acquired 100% of the outstanding common stock of Hall Company for $260 in cash.Which of the following statements regarding the consolidated balance sheet immediately after the acquisition is not correct?

• A)Total assets will be $1,020.
• B)Total cash will be $500.
• C)Total liabilities will be $640.
• D)Total net fixed assets will be $780.

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Definitions:

Operation of Law

Describes a legal process that occurs automatically due to established legal rules, without the need for action by any party.

Dissolution

The process of legally ending the existence of a corporation, partnership, or other legal entity.

Winding-Up Process

A formal procedure in which a company's assets are liquidated and liabilities are paid off before the company is dissolved.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another. The obligated party is typically in a position of trust, such as a financial advisor or trustee.