On January 1,20X8,Potter Corporation Acquired 90 Percent of Shoemaker Company's

question 6

Multiple Choice

On January 1,20X8,Potter Corporation acquired 90 percent of Shoemaker Company's voting stock,at underlying book value.The fair value of the noncontrolling interest was equal to 10 percent of the book value of Shoemaker at that date.Potter uses the fully adjusted equity method in accounting for its ownership of Shoemaker.On December 31,20X9,the trial balances of the two companies are as follows:

-Based on the preceding information,what amount would be reported as total liabilities in the consolidated balance sheet at December 31,20X9?

• A)$330,000
• B)$712,000
• C)$318,000
• D)$130,000

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Definitions:

Punitive Damages

Financial compensation awarded to an aggrieved party that goes beyond what is necessary to compensate for losses and is intended to punish the wrongdoer.

Fraud

A deliberate deception practiced to secure unfair or unlawful gain, or to deprive a victim of a legal right.

Scienter

A legal term referring to the knowledge of wrongdoing or fraudulent intent in actions that deceive others.

Common Law Fraud

A form of fraud based on case law where a false representation of a material fact is made with intent to deceive and resulting in damage to the victim.