On January 1, 2013, the Moody Company Entered into a Transaction

question 12

Multiple Choice

On January 1, 2013, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: $\begin{array}{lrr}&\text { Moody }& \text { Osorio }\\\text { Cash } & \$ 180 & \$ 40 \\\text { Receivables } & 810 & 180 \\\text { Inventories } & 1,080 & 280 \\\text { Land } & 600 & 360 \\\text { Buildings (net) } & 1,260 & 440 \\\text { Equipment (net) } & 480 & 100\\\text { Accounts payable } & (450) \\\text { Long-term liabilities } & (1,290) \\\text { Common stock }(\$ 1 \text { par }) &(330) \\\text { Common stock }(\$ 20 \text { par }) &&(240) \\\text { Additional paid-in capital } & (1,080) &(340) \\\text { Retained earnings } & (1,260) &(340) \end{array}$ Note: Parentheses indicate a credit balance. In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60.
What amount was recorded as the investment in Osorio?

• A)$930.
• B)$820.
• C)$800.
• D)$835.
• E)$815.

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Definitions:

Analysis

The process of examining data or information in order to understand its components, identify relationships, and evaluate patterns.

Insignificant Variables

Variables in a statistical model that do not have a significant impact on the model's ability to predict or describe the outcome.

Variables

Any characteristic, number, or quantity that can be measured or quantified, which changes or varies across different situations or observations.

Crime Rates

Quantitative measures that reflect the number of crimes committed per unit of population or area in a specific time frame.