Question

Paris Company had common stock of $350,000 and retained earnings of $490,000. London Inc. had common stock of $700,000 and retained earnings of $980,000. On January 1, 2018, London issued 34,000 shares of common stock with a $12 par value and a $35 fair value for all of Paris Company's outstanding common stock. This combination was accounted for using the acquisition method. Immediately after the combination, what was the amount of total consolidated net assets? A. $2,520,000. B. $1,190,000. C. $1,680,000. D. $2,870,000.

Answer 1

Answer: D. $2870000

Explanation:

Consolidated Assets are the assets that a company owes whether directly or indirectly through a subsidiary which will then be shown on the consolidated balance sheet of the company.

From the information given, the amount of total consolidated net assets will be calculated as:

= ($34000 × 35) + $700,000 + $980,000

= $1,190,000 + $700,000 + $980,000

= $2,870,000