Table 16-11
Parent Corporation Paid $110,000 to Acquire 60% of the Common

question 156

Multiple Choice

Table 16-11
Parent Corporation paid $110,000 to acquire 60% of the common shares of Subsidiary Inc. on December 31, 2017. At that date, Parent Corporation also had an outstanding note payable to Subsidiary Inc. in the amount of $50,000.
Assume that Parent Corporation and Subsidiary Inc. had the following account balances at December 31, 2017 (immediately after the investment) :
$\begin{array}{lcc}\text { Assets: } & \text { Parent } & \text { Subsidiary } \\& \text { Corporation } & \text { Inc. }\\\text { Cash } & \$ 75,000 & \$ 25,000 \\\text { Note receivable from Parent Corporation } & & 50,000 \\\text { Inventory } & 130,000 & 40,000 \\\text { Investment in Subsidiary Inc. } & 110,000 & \\\text { Other assets } & \underline{590,000} & \underline{35,000} \\\text { Total } & \underline{\$ 905,000} & \underline{ \$ 150,00}\end{array}$
Liabilities and shareholders' equity:
$$\begin{array} { l l l } \text { Accounts payable } & \$ 40,000 & \$ 30,000 \\\text { Note payable to Subsidiary Inc. } & 50,000 & \\\text { Common shares } & 500,000 & 100,000 \\\text { Retained earnings } & \underline{ 3 1 5 , 0 0 0 } & \underline { 2 0 , 0 0 0 } \\\text { Total } & \underline{ \$ 905,0000 }& \underline{ \$ 150,0000}\end{array}$$
-Refer to Table 16-11.What is the value of the Parent Corporation investment account at December 31,2017 if the Subsidiary Inc.had net income of $40,000 and paid a total of $3,000 in dividends in 2015?

• A) $132,000
• B) $110,000
• C) $147,000
• D) $150,000

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