Presented Below Are the Balance Sheets of Tallton Company and Handel

question 55

Multiple Choice

Presented below are the balance sheets of Tallton Company and Handel Company at January 1,2X13: $\begin{array}{llll}\begin{array} { llll } &\text { Handel Company } &&\text { Tallton Company } \\&\text { Balance Sheet } &&\text { Balance Sheet } \\&\text { January 1, 2X13 } &&\text {January 1, 2X13 } \\\end{array}\\\begin{array} { llll } \text { Cash } & \$ 70 & \text { Cash } & \$ 240 \\\text { Net Fixed Assets } & 210 & \text { Net Fixed Assets } & \underline{210} \\\text { Total Assets } & \$ 280 & \text { Total Assets } & \$ 450\end{array}\end{array}$ $\begin{array}{llll}\text { Accounts Payable } & \$ 20 & \text { Accounts Payable } & \$ 70 \\\text { Long-term Bonds Pay. } & 120 & \text { Long-term Bonds Pay. } & 150 \\\text { Stockholders' Equity } & 140 & \text { Stockholders' Equity } & 230 \\ \text { Total Liab. \& Equity } & \$ 280 & \text { Total Liab. \& Equity } & \$ 450\end{array}$ On January 1,2X13,Tallton Company acquired 100% of the outstanding common stock of Handel Company for $140 in cash.Assume the book value of Handel's assets and liabilities equals the market value.
What journal entry will Handel Company make on January 1,2X13?

• A)\(\begin{array}{lll}
• \text { Cash } & 140 & \\
• \quad \text { Common Stock } & & 140 \\
• \end{array}\)
• B) \(\begin{array}{lccc}
• \text { Cash } & 140 & \\
• \quad \text { Investment by Tallton Co. } & & 140 \\
• \end{array}\)
• C)\(\begin{array}{lccc}
• \text { Cash } & 140 & \\
• \quad \text { Treasury Stock } & & 140 \\
• \end{array}\)
• D)\(\begin{array}{lccc}
• \text { Cash } & 140 & \\
• \text { Accounts Payable } & 20 & \\
• \text { Long-term Bonds Payable } & 120 & \\
• \quad \text { Fixed Assets } & & 210 \\
• \text { Cash } & & 70
• \end{array}\)
• E)No journal entry is necessary.

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Definitions:

Inelastic Demand

Refers to a market situation where the demand for a product does not change significantly in response to a change in price.

Elastic Demand

A market scenario where the quantity demanded of a product or service significantly changes in response to a change in price.

Fast-Food

Quick service restaurants serving food that is prepared and served rapidly.

Consumer Surplus

The benefit obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay.