On January 1, 2016, Pent Company and Shelter Company Had

question 9

Multiple Choice

On January 1, 2016, Pent Company and Shelter Company had condensed balance sheets as follows: On January 2, 2016 Pent borrowed $180,000 and used the proceeds to purchase 90% of the outstanding common stock of Shelter. This debt is payable in 10 equal annual principal payments, plus interest, starting December 30, 2016. Any difference between book value and the value implied by the purchase price relates to land. On Pent's January 2, 2016 consolidated balance sheet, current liabilities should be:

• A) $150,000.
• B) $138,000.
• C) $120,000.
• D) $90,000.

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Definitions:

COGS

COGS, or Cost of Goods Sold, represents the direct costs attributable to the production of the goods sold by a company, including material and labor costs.

Payables Turnover Rate

An efficiency ratio that measures how quickly a company pays off its suppliers, calculated as cost of goods sold divided by average accounts payable.

Accounts Payable Balance

The total amount of short-term liabilities or obligations a company owes to its creditors or suppliers.

Sales

The total revenue generated from goods or services sold by a company during a specific period.