On January 1, 2014, Palk Corp. and Spraz Corp. had condensed balance sheets as f

Question

On January 1, 2014, Palk Corp. and Spraz Corp. had condensed balance sheets as follows: On January 2, 2014, Palk borrowed the entire $84,000 it needed to acquire 80% of the outstanding common shares of Spraz. The loan was to be paid in ten equal annual principal payments, plus interest, beginning December 31, 2014. The excess consideration transferred over the underlying book value of the acquired net assets was allocated 60% to inventory and 40% to goodwill. What are the total consolidated current liabilities at January 2, 2014?

A. $53,200. B. $56,000. C. $64,400. D. $42,000. E. $70,000.

Explanation / Answer

C. $64,400.

Working: Liability $56,000 + Current portion of loan repayable = 84,000 / 10 = 8,400 = $64,400

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