Lea Company acquired all of Tenzing Corporation’s stock on January 1, 20X6 for $150,000 cash. On December 31, 20X8, the trial balances of the two companies were as follows:
| Lea company | Tenzing Corp. | |||
| Debit | Credit | Debit | Credit | |
| Cash | $90,000 | $58,000 | ||
| Accounts Receivable | 97,000 | 55,000 | ||
| Land | 80,000 | 45,000 | ||
| Buildings and Equipment | 300,000 | 200,000 | ||
| Investment in Tenzing Corporation | 180,000 | |||
| Cost of Services Provided | 140,000 | 75,000 | ||
| Depreciation Expense | 30,000 | 20,000 | ||
| Other Expenses | 70,000 | 35,000 | ||
| Dividends Declared | 40,000 | 20,000 | ||
| Accumulated Depreciation | $180,000 | $100,000 | ||
| Accounts Payable | 42,000 | 18,000 | ||
| Taxes Payable | 20,000 | 20,000 | ||
| Notes Payable | 75,000 | 50,000 | ||
| Common Stock | 100,000 | 50,000 | ||
| Retained Earnings | 265,000 | 90,000 | ||
| Service Revenue | 300,000 | 180,000 | ||
| Income from Subsidiary | 45,000 | |||
| $1,027,000 | $1,027,000 | $508,000 | $508,000 | |
Tenzing Corporation reported retained earnings of $75,000 at the date of acquisition. The difference between the acquisition price and underlying book value is assigned to buildings and equipment with a remaining economic life of five years from the date of acquisition. At December 31, 20X8, Tenzing owed Lea $4,000 for services provided.
4. Based on the preceding information, all of the following are consolidating entries required on December 31, 20X8, to prepare consolidated financial statements, except:
| A) | Common Stock | 50,000 | |
| Retained Earnings | 90,000 | ||
| Income from Tenzing Corp. | 50,000 | ||
| Dividends declared | 20,000 | ||
| Investment in Tenzing Corp. | 170,000 | ||
| B) | Accounts Payable | 4,000 | |
| Accounts Receivable | 4,000 | ||
| C) | Depreciation Expense | 5,000 | |
| Income from Tenzing Corp. | 5,000 | ||
| D) | Buildings and Equipment | 20,000 | |
| Accumulated Depreciation | 10,000 | ||
| Investment in Tenzing Corp. | 10,000 |
Option A
Option B
Option C
Option D
5. Based on the preceding information, what amount will be reported as total assets in the consolidated balance sheet for 20X8?
$666,000
$747,000
$651,000
$946,000
6. Based on the preceding information, what amount will be reported for total accounts payable in the consolidated balance sheet for the year 20X8?
$56,000
$46,000
$60,000
$42,000
