Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2012, for $3,800 cash. As of that date Hurley has the following trial balance;
Dr Cr
Cash $500
Account receivable $600
Inventory $800
Buildings (net) (5 year life) $1,500
Equipment (net) (2 years) $1,000
Land $900
Account payable $400
Long term liabilities $1,800
Common stock $1,000
Additional Paid in capital $600
Retained Earnings $1,500
Total $5,300 $5,300
Net Income and dividends reported by Hurley for 2012 and 2013 is as follows
2012 2013
Net income $100 $120
Dividends $30 $40
The fair value of Hurley’s net assets that differ from their book values are listed below:
Fair value
Inventory $900
Buildings $1,200
Equipment $1,250
Land $1,300
Long term Liabilities $1,700
Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used.
Compute the amount of Hurley's long-term liabilities that would be reported in a December 31, 2012, consolidated balance sheet.
A) $1,800.
B) $1,700.
C) $1,725.
D) $1,675.
Thank you again.
