Company a Has Decided to Purchase 100% of the Voting

question 40

Multiple Choice

Company A has decided to purchase 100% of the voting shares of Company B for $100,000 on January 1, 2012. Immediately before the acquisition, A and B reported cash balances of $300,000 and $150,000 respectively. If Consolidated Financial Statements were prepared immediately following the acquisition, how much Cash would be reported on A's consolidated balance sheet?

• A) $250,000.
• B) $350,000.
• C) $450,000.
• D) $550,000.

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Definitions:

Implicit Cost

The opportunity cost equal to what a firm must give up in order to use resources it already owns for production, without direct payment.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs.

Economic Profit

The difference between total revenue and total cost, including both explicit and implicit costs.