On January 1, 2006, Polk Corp. and Strass Corp. had condensed balance sheets as follows: Polk Strass Current assets $ 70,000 $20,000 Noncurrent assets 90,000 40,000 Total Assets $160,000 $60,000 Current liabilities $ 30,000 $10,000 Long-term debt 50,000 -- Stockholders’ equity 80,000 50,000 Total liabilities and stockholders’ equity $160,000 $60,000 On January 2, 2018, Polk borrowed P60,000 and used the proceeds to purchase 90% of the outstanding common shares of Strass. This debt is payable in ten equal annual principal payments, plus interest, beginning December 30, 2018. The excess cost of the investment over Strass’s book value of acquired net assets should be allocated 60% to inventory and 40% to goodwill. On January 1, 2018, the fair value of Polk shares held by noncontrolling interest parties was P10,000. Questions: Current assets should be ? P90,000 P99,000 P100,000 P102,000 Noncurrent assets should be ? P130,000 P136,000 P138,000 P140,000 . Current liabilities should be ? P50,000 P46,000 P40,000 P50,000 Noncurrent liabilities should be ? P115,000 P109,000 c. P104,000 d. P55,000 Stockholder’s equity including noncontrolling interests should be? P80,000 b. P85,000 c. P90,000 d. P130,000

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 103.4C

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Question

On January 1, 2006, Polk Corp. and Strass Corp. had condensed balance sheets as follows:

	Polk	Strass
Current assets	$ 70,000	$20,000
Noncurrent assets	90,000	40,000
Total Assets	$160,000	$60,000
Current liabilities	$ 30,000	$10,000
Long-term debt	50,000	--
Stockholders’ equity	80,000	50,000
Total liabilities and stockholders’ equity	$160,000	$60,000

On January 2, 2018, Polk borrowed P60,000 and used the proceeds to purchase 90% of the outstanding common shares of Strass. This debt is payable in ten equal annual principal payments, plus interest, beginning December

30, 2018. The excess cost of the investment over Strass’s book value of acquired net assets should be allocated

60% to inventory and 40% to goodwill. On January 1, 2018, the fair value of Polk shares held by noncontrolling interest parties was P10,000.

Questions:

Current assets should be ?

P90,000
P99,000
P100,000
P102,000

Noncurrent assets should be ?

P130,000
P136,000
P138,000
P140,000

. Current liabilities should be ?

P50,000
P46,000
P40,000
P50,000

Noncurrent liabilities should be ?

P115,000
P109,000 c. P104,000 d. P55,000

Stockholder’s equity including noncontrolling interests should be?

P80,000 b. P85,000 c. P90,000 d. P130,000

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