ABC Inc Has Acquired All of the Voting Shares of DEF

question 33

Essay

ABC Inc. has acquired all of the voting shares of DEF Inc and is gathering the necessary data to prepare consolidated financial statements. ABC paid $1,200,000 for its investment. Details of the companies' assets and liabilities on the acquisition date are shown below:
Required:
Assuming that DEF hasn't set up Deferred Tax Asset or Liability accounts, determine the amounts that would be used to prepare the Consolidated Balance Sheet on the acquisition date. Assume a tax rate of 50%.
$\begin{array}{|l|l|l|} \hline& \text { Fair Market Value } & \text { Tar Basis } \\\hline \text { Imentory } & \$ 80,000 & \$ 80,000 \\\hline \text { Accounts Receivable } & \$ 100,000 & \$- \\\hline \text { Land } & \$ 200,000 & \$ 200,000 \\\hline \text { Buildings } & \$ 300,000 & \$ 200,000 \\\hline \text { Equipment } & \$ 250,000 & \$ 200,000 \\\hline \text { Accounts Pay able } & \$ 70,000 & \$ 70,000 \\\hline\end{array}$

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Definitions:

Happiness

A state of well-being and contentment characterized by positive emotions and fulfillment.

Children

Young human beings who are not yet adults, characterized by rapid physical growth, cognitive development, and emotional maturation.

Young Adults

Young adults are individuals who are in a transitional stage of physical and psychological development that generally occurs during the period from the late teens through the twenties.

Optimistic

Possessing a hopeful or confident attitude towards the future or the success of something.