Following Are Selected Accounts for Green Corporation and Vega Company

question 50

Multiple Choice

Following are selected accounts for Green Corporation and Vega Company as of December 31, 2023. Several of Green's accounts have been omitted. Green acquired 100% of Vega on January 1, 2019, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2019, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000, and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.Compute the book value of Vega at January 1, 2019.

• A)$997,500.
• B)$857,500.
• C)$1,200,000.
• D)$1,600,000.
• E)$827,500.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, such as loans or bonds.

Discount on Bonds Payable

The difference when a bond is issued for less than its face value, which affects the interest expense over the bond's life.

Par Value

The face value of a bond or stock, representing the amount that will be returned to the holder at maturity, often used as a legal face value for stocks.

Installment Note

A debt instrument that requires a series of periodic payments of both principal and interest until the debt is paid in full.