On January 1, 2015, the Moody Company entered into a transaction for 100% of the

Question

On January 1, 2015, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Note: Parentheses indicate a credit balance. In Moody's appraisal of Osorio, three assets were deemed to be undervalued on the subsidiary's books: Inventory by $10, Land by $40, and Buildings by $60. What amount was recorded as the investment in Osorio? A) $930. B) $820. C) $800. D) $835.

Explanation / Answer

Calculation of cost of investment

Thus answer will be C) $800

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