Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2012. On that
ID: 2420819 • Letter: P
Question
Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2012. On that date, Paar’s equipment (10-year life) has a book value of $335,000 but a fair value of $468,000. Kimmel has equipment (10-year life) with a book value of $258,000 but a fair value of $391,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2014, Paar has equipment with a book value of $234,500 but a fair value of $390,000. Kimmel has equipment with a book value of $180,600 but a fair value of $348,100. What is the consolidated balance for the Equipment account as of December 31, 2014?
Explanation / Answer
At the time of consolidation, asset of Kimmel will be recorded at acquistion date fair value and depreciation shall be provided on that value.
Kimmel's asset at 1 January 2012 = 468,000
Depreciation for 2012,2013 and 2014 = (468,000/10)*3=140,400
Kimmel's book value of asset at 31 dec 2014 = 468000-140,400=327,600
Consolidated balance of Equipment at 31 Dec 2014 = Book value of Paar Corporation + Book value of Kimmel=234,500+327,600=562,100
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