John Purchases All of the Common Stock of Clarke Corporation

question 64

Multiple Choice

John purchases all of the common stock of Clarke Corporation for $280,000.The assets of the corporation are:
$\begin{array}{lcc}\underline {\text {Asset}}& \underline {\text { Adjusted Basis }}& \underline {\text { Fair Market Value } }\\\text { Inventory } & \$ 25,000 & \$ 50,000 \\\text { Equipment } & 60,000 & 40,000 \\\text { Supplies } & 20,000 & 20,000 \\\text { Building } & 80,000 & 95,000 \\\text { Land } & \underline {10,000 }& \underline {20,000} \\&\$ 195,000 & \$ 225,000\end{array}$
What is John's basis in the common stock he acquired?

• A)$195,000
• B)$215,000
• C)$225,000
• D)$250,000
• E)$280,000

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Definitions:

Consolidation

Consolidation involves combining the financial statements of multiple subsidiary entities into those of a single parent entity, providing a unified view of financial performance and position.

Patent Account

An accounting record that reflects the value of patents a company owns, including costs associated with obtaining and protecting these intellectual properties.

Unamortized Patent

The portion of a patent's purchase cost that has not yet been expensed in the company's financial statements over the patent's useful life.