A parent company acquired 100% of the outstanding common stock of another corporation. The parent is going to use push-down accounting. The fair market value of each of the acquired corporation's assets is lower than its respective book value. The fair market value of each of the acquired corporation's liabilities is higher than its respective book value. The corporation has a deficit in the Retained Earnings account. Which one of the following statements is correct?
Answer
a. The push-down capital account will have a credit balance after this transaction is posted.
b. The push-down capital account will have a debit balance after this transaction is posted.
c. The push-down capital account will have either a debit or credit balance depending upon whether the assets adjustments exceed the liability adjustments, or vice versa.
d. Subsidiary retained earnings will have a deficit balance after this transaction is posted.