Treadway Corporation acquires Hooker, Inc., on January 1, 2010.The parent pays m

Question

Treadway Corporation acquires Hooker, Inc., on January 1, 2010.The parent pays more for it than the fair value of the subsidiariesnet assets. On that date, Treadway has equipment with a book valueof $420,000 and a fair value of $530,000. Hooker has equipment witha book value of $330,000 and a fair value of $390,000. Hooker isgoing to use push-down accounting. Immediately after theacquisition, what amounts in the Equipment account appear onHooker's separate balance sheet and on the consolidated balancesheet?

a. $330,000 and $750,000

b. $330,000 and $860,000

c. $390,000 and $810,000

d. $390,000 and $920,000

Explanation / Answer

I got answer C, 390,000 and 810,000 because if Hooker, Inc is using pushdown accounting, then on their books the Equipment account should be valued at fair value. The Equipment on Treadway's books continues to be reported at Cost.

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