Keen Inc. and Lax Inc. had the following balance sheets on October 31, 2019: Keen Inc Lax Inc Lax Inc (carrying value) (carrying value) (fair value) Cash $ 300 , 000 $ 80 , 000 $ 80 , 000 Accounts Receivable $ 60 , 000 $ 24 , 000 $ 24 , 000 Inventory $ 30 , 000 $ 54 , 000 $ 50 , 000 Plant and Equipment (net) $ 310 , 000 $ 280 , 000 $ 300 , 000 Trademark $ 12 , 000 $ 16 , 000 Total Assets $ 700 , 000 $ 450 , 000 Accounts Payable $ 150 , 000 $ 200 , 000 $ 200 , 000 Bonds Payable $ 400 , 000 $ 120 , 000 $ 100 , 000 Common Shares $ 100 , 000 $ 60 , 000 Retained Earnings $ 50 , 000 $ 70 , 000 Total Liabilities and Equity $ 700 , 000 $ 450 , 000 \begin{array}{|l|r|r|r|}\hline & ext { Keen Inc } & ext { Lax Inc } & ext { Lax Inc } \\hline & ext { (carrying value) } & ext { (carrying value) } & ext { (fair value) } \\hline ext { Cash } & \$ 300,000 & \$ 80,000 & \$ 80,000 \\hline ext { Accounts Receivable } & \$ 60,000 & \$ 24,000 & \$ 24,000 \\hline ext { Inventory } & \$ 30,000 & \$ 54,000 & \$ 50,000 \\hline ext { Plant and Equipment (net) } & \$ 310,000 & \$ 280,000 & \$ 300,000 \\hline ext { Trademark } & & \$ 12,000 & \$ 16,000 \\hline ext { Total Assets } & \$ 700,000 & \$ 450,000 \\hline ext { Accounts Payable } & \$ 150,000 & \$ 200,000 & \$200,000\\hline ext { Bonds Payable } & \$ 400,000 & \$ 120,000 & \$100,000 \\hline ext { Common Shares } & \$ 100,000 & \$ 60,000 \\hline ext { Retained Earnings } & \$ 50,000 & \$ 70,000 \\hline ext { Total Liabilities and Equity } & \$ 700,000 & \$ 450,000 \\hline\end{array} Cash Accounts Receivable Inventory Plant and Equipment (net) Trademark Total Assets Accounts Payable Bonds Payable Common Shares Retained Earnings Total Liabilities and Equity Keen Inc (carrying value) $300 , 000 $60 , 000 $30 , 000 $310 , 000 $700 , 000 $150 , 000 $400 , 000 $100 , 000 $50 , 000 $700 , 000 Lax Inc (carrying value) $80 , 000 $24 , 000 $54 , 000 $280 , 000 $12 , 000 $450 , 000 $200 , 000 $120 , 000 $60 , 000 $70 , 000 $450 , 000 Lax Inc (fair value) $80 , 000 $24 , 000 $50 , 000 $300 , 000 $16 , 000 $200 , 000 $100 , 000 On November 1, 2019, Keen acquired 80% of Lax Inc. for cash consideration of $240,000. Assume that the following draft balance sheet was prepared by a co-worker on the date of acquisition. Assuming this balance sheet is devoid of technical errors, what can be concluded about the balance sheet below?

Question

Keen Inc. and Lax Inc. had the following balance sheets on October 31, 2019:  Keen Inc   Lax Inc   Lax Inc   (carrying value)   (carrying value)   (fair value)   Cash  $ 300 , 000 $ 80 , 000 $ 80 , 000  Accounts Receivable  $ 60 , 000 $ 24 , 000 $ 24 , 000  Inventory  $ 30 , 000 $ 54 , 000 $ 50 , 000  Plant and Equipment (net)  $ 310 , 000 $ 280 , 000 $ 300 , 000  Trademark  $ 12 , 000 $ 16 , 000  Total Assets  $ 700 , 000 $ 450 , 000  Accounts Payable  $ 150 , 000 $ 200 , 000 $ 200 , 000  Bonds Payable  $ 400 , 000 $ 120 , 000 $ 100 , 000  Common Shares  $ 100 , 000 $ 60 , 000  Retained Earnings  $ 50 , 000 $ 70 , 000  Total Liabilities and Equity  $ 700 , 000 $ 450 , 000 \begin{array}{|l|r|r|r|}\hline  &  	ext { Keen Inc }  &  	ext { Lax Inc }  &  	ext { Lax Inc } \\hline  &  	ext { (carrying value) }  &  	ext { (carrying value) }  &  	ext { (fair value) } \\hline 	ext { Cash }  &  \$ 300,000  &  \$ 80,000  &  \$ 80,000 \\hline 	ext { Accounts Receivable }  &  \$ 60,000  &  \$ 24,000  &  \$ 24,000 \\hline 	ext { Inventory }  &  \$ 30,000  &  \$ 54,000  &  \$ 50,000 \\hline 	ext { Plant and Equipment (net) }  &  \$ 310,000  &  \$ 280,000  &  \$ 300,000 \\hline 	ext { Trademark }  &   &  \$ 12,000  &  \$ 16,000 \\hline 	ext { Total Assets }  &  \$ 700,000  &  \$ 450,000 \\hline 	ext { Accounts Payable }  &  \$ 150,000  &  \$ 200,000  & \$200,000\\hline 	ext { Bonds Payable }  &  \$ 400,000  &  \$ 120,000 & \$100,000 \\hline 	ext { Common Shares }  &  \$ 100,000  &  \$ 60,000 \\hline 	ext { Retained Earnings }  &  \$ 50,000  &  \$ 70,000 \\hline 	ext { Total Liabilities and Equity }  &  \$ 700,000  &  \$ 450,000 \\hline\end{array}  Cash   Accounts Receivable   Inventory   Plant and Equipment (net)   Trademark   Total Assets   Accounts Payable   Bonds Payable   Common Shares   Retained Earnings   Total Liabilities and Equity  ​  Keen Inc   (carrying value)  $300 , 000 $60 , 000 $30 , 000 $310 , 000 $700 , 000 $150 , 000 $400 , 000 $100 , 000 $50 , 000 $700 , 000 ​  Lax Inc   (carrying value)  $80 , 000 $24 , 000 $54 , 000 $280 , 000 $12 , 000 $450 , 000 $200 , 000 $120 , 000 $60 , 000 $70 , 000 $450 , 000 ​  Lax Inc   (fair value)  $80 , 000 $24 , 000 $50 , 000 $300 , 000 $16 , 000 $200 , 000 $100 , 000 ​ ​   On November 1, 2019, Keen acquired 80% of Lax Inc. for cash consideration of $240,000. Assume that the following draft balance sheet was prepared by a co-worker on the date of acquisition. Assuming this balance sheet is devoid of technical errors, what can be concluded about the balance sheet below?

Zybrea Knight · Accepted Answer

Final Answer :  Keen Inc.Consolidated Balance Sheet,as at November 1, 2019  Cash  $ 124 , 000  Accounts Receivable  $ 79 , 200  Inventory  $ 70 , 000  Plant and Equipment (net)  $ 550 , 000  Trademark  $ 12 , 800  Goodwill  $ 104 , 000  Total Assets  $ 940 , 000  Accounts Payable  $ 310 , 000  Bonds Payable  $ 480 , 000  Common Shares  $ 100 , 000  Retained Earnings  $ 50 , 000  Total Liabilities and Equity  $ 940 , 000 \begin{array}{|l|c|}\hline 	ext { Cash }  &  \$ 124,000 \\hline 	ext { Accounts Receivable }  &  \$ 79,200 \\hline 	ext { Inventory }  &  \$ 70,000 \\hline 	ext { Plant and Equipment (net) }  &  \$ 550,000 \\hline 	ext { Trademark }  &  \$ 12,800 \\hline 	ext { Goodwill }  &  \$ 104,000 \\hline 	ext { Total Assets }  &  \$ 940,000 \\hline 	ext { Accounts Payable }  &  \$ 310,000 \\hline 	ext { Bonds Payable }  &  \$ 480,000 \\hline 	ext { Common Shares }  &  \$ 100,000 \\hline 	ext { Retained Earnings }  &  \$ 50,000 \\hline 	ext { Total Liabilities and Equity }  &  \$ 940,000\\hline\end{array}  Cash   Accounts Receivable   Inventory   Plant and Equipment (net)   Trademark   Goodwill   Total Assets   Accounts Payable   Bonds Payable   Common Shares   Retained Earnings   Total Liabilities and Equity  ​ $124 , 000 $79 , 200 $70 , 000 $550 , 000 $12 , 800 $104 , 000 $940 , 000 $310 , 000 $480 , 000 $100 , 000 $50 , 000 $940 , 000 ​ ​   This balance sheet was prepared using the Proportionate Consolidation Method. There is no non-controlling interest (NCI) section on the balance sheet, and Keen's consolidated balance sheet amounts (with the exception of the shareholders' equity section) include Keen's book values and 80% of Lax's fair values.

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