On January 1, 2014, Palk Corp On January 2, 2014, Palk Borrowed the Entire $84,000 It

question 36

Multiple Choice

On January 1, 2014, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: $\begin{array}{|l|c|c|}\hline &\text { Palk Corp. } & \text { Spraz Corp. } \\\hline \text { Current assets } & \$ \quad 99,000 & \$ 28,000 \\\hline \text { Noncurrent assets } & \$ 125,000 & \$ 56,000 \\\hline \text { Total assets } & \$ \quad 224,000 & \$ 84,000 \\\hline \text { Current liabilities } & \text { S } \quad 42,000 & \$ 14,000 \\\hline \text { Long-term debt } & \$ 70,000 & \$ \text { - } \\\hline \text { Stockholders' equity } & \$ 112,000 & \$70,000 \\\hline \text { Total liabilities and stockholders' equity } & \$ 224,000 & \$ 84,000 \\\hline\end{array}$ On January 2, 2014, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2014. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. What is consolidated current assets at January 2, 2014?

• A)$127,000.
• B)$129,800.
• C)$143,800.
• D)$148,000.
• E)$135,400.

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Definitions:

Leverage

The use of borrowed funds to increase the potential return of an investment.

Return on Stockholders' Equity

A measure of financial performance calculated by dividing net income by average shareholders' equity, indicating how effectively equity is used to generate profit.

Price-Earnings Ratio

A ratio for valuing a company that measures its current share price relative to its per-share earnings.

Market Price

The existing rate at which a service or commodity can be acquired or disposed of.