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24 December, 00:20

McGuire Company acquired 100 percent of the voting common shares of Able Corporation by issuing bonds with a par value and fair value of $150,000. Immediately prior to the acquisition, McGuire reported total assets of $500,000, liabilities of $280,000, and stockholders' equity of $220,000. At that date, Able reported total assets of $400,000, liabilities of $250,000, and stockholders' equity of $150,000. Included in Able's liabilities was an account payable to McGuire in the amount of $20,000, which McGuire included in its accounts receivable. Based on the preceding information, what amount of total assets did McGuire report in its balance sheet immediately after the acquisition?

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  1. 24 December, 03:00
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    Answer: $650,000

    Explanation:

    Given that,

    Fair and par value of issued bonds = $150,000

    Prior acquisition, McGuire reported

    Total assets = $500,000

    Liabilities = $280,000

    Stockholders' equity = $220,000

    At that date, Able reported

    Total assets = $400,000

    Liabilities = $250,000

    Stockholders' equity = $150,000

    Account payable to McGuire = $20,000

    Total assets reported by McGuire after acquisition:

    = Total assets + Fair value of investment

    = $500,000 + $150,000

    = $650,000
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