On December 31,2008,Mercury Corporation Acquired 100 Percent Ownership of Saturn

question 2

Multiple Choice

On December 31,2008,Mercury Corporation acquired 100 percent ownership of Saturn Corporation.On that date,Saturn reported assets and liabilities with book values of $300,000 and $100,000,respectively,common stock outstanding of $50,000,and retained earnings of $150,000.The book values and fair values of Saturn's assets and liabilities were identical except for land which had increased in value by $10,000 and inventories which had decreased by $5,000.
-Based on the preceding information,which of the following will pertain to the differential that will appear in the eliminating entries required to prepare a consolidated balance sheet immediately after the business combination,if the acquisition price was $195,000?

• A)Debit balance of $15,000
• B)Credit balance of $15,000
• C)Credit balance of $5,000
• D)Debit balance of $5,000

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Definitions:

Minimum Price

Is the lowest price at which a product or service can be sold, often set by law or regulation to protect producers or consumers.

Producer

An individual, company, or entity that creates goods or provides services.

Total Cost

The entirety of expenses, fixed and variable, involved in the production of services or goods.

Market Price

The existing value at which an asset or service may be sold or acquired in a trading environment.