On January 1, 2010, Palk Corp

question 33

Multiple Choice

On January 1, 2010, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: On January 2, 2010, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2010. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. What are the total consolidated current liabilities at January 2, 2010?

• A) $53,200.
• B) $56,000.
• C) $64,400.
• D) $42,000.
• E) $70,000.

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Definitions:

Equity Securities

Equity securities are financial instruments that signify ownership in a company or an entity, and represent a claim on part of its assets and earnings.

Pre-2009 Business Combination

Refers to business mergers or acquisitions that occurred before the implementation of the revised accounting standards in 2009.

Direct Combination Costs

Expenses directly associated with the merging or acquisition of companies, such as legal fees and consultancy charges.

Register and Issue Stock

The process where a company records and distributes new shares of its stock to investors, officially increasing the number of shares available.