Keen Inc and Lax Inc Assuming That Keen Inc

question 34

Essay

Keen Inc. and Lax Inc. had the following balance sheets on October 31, 2018: $\begin{array}{|l|l|l|l|}\hline & \text { Keen Inc } & \text { Lax Inc } & \text { Lax Inc } \\\hline & \text { (carry ing value) } & \text { (carrying value) } & \text { (fair value) } \\\hline \text { Cash } & \$ 300,000 & \$ 80,000 & \$ 80,000 \\\hline \text { Accounts Receivable } & \$ 60,000 & \$ 24,000 & \$ 24,000 \\\hline \text { Inventory } & \$ 30,000 & \$ 54,000 & \$ 50,000 \\\hline \text { Plant and Equipment (net) } & \$ 310,000 & \$ 280,000 & \$ 300,000 \\\hline \text { Trademark } & & \$ 12,000 & \$ 16,000 \\\hline \text { Total Assets } & \$ 700,000 & \$ 450,000 & \\\hline & & & \\\hline \text { Accounts Payable } & \$ 150,000 & \$ 200,000 & \$ 200,000 \\\hline \text { Bonds Pay able } & \$ 400,000 & \$ 120,000 & \$ 100,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 60,000 & \\\hline \text { Retained Earnings } & \$ 50,000 & \$ 70,000 & \\\hline \text { Total Labilities and Equiby } & \$ 700,000 & \$ 450,000 & \\\hline & & & \\\hline\end{array}$
Assuming that Keen Inc. purchases 100% of Lax Inc. for $200,000, prepare the consolidated balance sheet on the date of acquisition under the Entity Theory.

---

Definitions:

Merchandise

Products that a company buys to resell to its customers.

Cash Paid

The actual outflow of cash during a period for expenses, investments, and other financial activities.

Perpetual Inventory System

An inventory tracking system where updates are made continuously as transactions occur, providing real-time inventory levels.

Gross Method

An accounting method where purchases are recorded at their gross price, without deducting any discounts at the time of purchase.