Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that
ID: 2414701 • Letter: P
Question
Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paar’s equipment (10-year life) has a book value of $352,500 but a fair value of $507,500. Kimmel has equipment (10-year life) with a book value of $250,000 but a fair value of $408,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2017, Paar has equipment with a book value of $246,750 but a fair value of $434,950. Kimmel has equipment with a book value of $175,000 but a fair value of $383,700. What is the consolidated balance for the Equipment account as of December 31, 2017?
a)$818,650.
b)421,750
c)579,750
d)532,350
Explanation / Answer
The Answer is “ D. 532,350 “
Particulars
Amount
Paar Corporation's Equipment Book Value on December 31, 2017
$246,750
Add : Kimmel’s Equipment with a book value
175,000
Add : Allocation to Kimmel's equipment [$408,000 – 250,000]
158,000
Less : Amortization of Kimmel's equipment Allocation for 3 Years [ ($158,000 / 10 years) x 3 years ]
(47,400)
Consolidated balance for the Equipment account as of December 31, 2017
$532,350
Particulars
Amount
Paar Corporation's Equipment Book Value on December 31, 2017
$246,750
Add : Kimmel’s Equipment with a book value
175,000
Add : Allocation to Kimmel's equipment [$408,000 – 250,000]
158,000
Less : Amortization of Kimmel's equipment Allocation for 3 Years [ ($158,000 / 10 years) x 3 years ]
(47,400)
Consolidated balance for the Equipment account as of December 31, 2017
$532,350
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