Constant Corp $\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Per Month }$ Assume Revenue and Earnings Remain Same for the Next Year

question 9

Multiple Choice

Constant Corp. bought Steady Company on June 30, 2005 in a pooling-of-interests transaction. Both companies are in stagnant markets. Steady had total assets of $50,000 and total liabilities of $30,000 with fair market values of $60,000 and $30,000, respectively. Constant issued 1,000 shares, valued at $45 per share. Both companies operate in tax-free havens and take a half-year's depreciation in the year acquired using ten-year lives. Monthly operating results are as follows:
$\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Per Month }$
$\begin{array} { | l | r | r | } \hline \text { Sales } & \$ 3,000 & \$ 1,000 \\\hline \text { Expenses } & 2,000 & 800 \\\hline \text { Net income } & \$ 1,000 & \$ 200\\\hline\end{array}$ Assume revenue and earnings remain same for the next year. Company is following SFAS 142.
-If accounted for as a pooling-of-interests, 2005 consolidated earnings are reported as:

• A) $12,000
• B) $13,200
• C) $14,400
• D) It cannot be determined without further information

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