Need an explanation of why the answer is B, thank you! On January 1, 2016,...
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Accounting
Need an explanation of why the answer is B, thank you!
On January 1, 2016, Pell Company and Sand Company had condensed balance sheets as follows:
Pell
Sand
Current assets
$ 280,000
$80,000
Noncurrent assets
360,000
160,000
Total assets
$640,000
$240,000
Current liabilities
$ 120,000
$40,000
Long-term debt
200,000
-0-
Stockholders' equity
320,000
200,000
Total liabilities & stockholders' equity
$640,000
$240,000
On January 2, 2016 Pell borrowed $240,000 and used the proceeds to purchase 90% of the outstanding common stock of Sand. This debt is payable in 10 equal annual principal payments, plus interest, starting December 30, 2016. Any difference between book value and the value implied by the purchase price relates to land.
On Pell's January 2, 2016 consolidated balance sheet, noncurrent liabilities should be:
a) $440,000.
b) $416,000.
c) $240,000.
d) $216,000.
Answer: b
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