REFERENCE: Ref.02_04 on January 1,20X1,the Moody Company Entered into a Transaction for Transaction

question 33

Multiple Choice

REFERENCE: Ref.02_04
On January 1,20X1,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 purchase.Another $15 was paid in connection with stock issuance costs.Prior to these transactions,the balance sheets for the two companies were as follows: 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.
-If the transaction is accounted for as a purchase,what amount was recorded as the investment in Osorio?

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

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Definitions:

CESA Contribution

Funds put into a Coverdell Education Savings Account (CESA) to finance a beneficiary's educational expenses.

AGI

Adjusted Gross Income is the gross income of an individual or entity minus specific deductions, used to calculate taxable income on U.S. federal income taxes.

SIMPLE Plan

A retirement savings plan available for small businesses and self-employed individuals, offering a simplified way to save for retirement.

Salary

A fixed regular payment, typically monthly or biweekly, made by an employer to an employee, especially a professional or white-collar worker.