Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that
ID: 2413837 • 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 $505,000 but a fair value of $695,000. Kimmel has equipment (10-year life) with a book value of $262,000 but a fair value of $462,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2017, Paar has equipment with a book value of $353,500 but a fair value of $587,700. Kimmel has equipment with a book value of $183,400 but a fair value of $441,500. What is the consolidated balance for the Equipment account as of December 31, 2017?
Multiple Choice
a. $536,900.
b. $736,900.
c. $1,029,200.
d. $676,900.
Explanation / Answer
The Answer is “d. $676,900 “
Particulars
Amount
Paar Corporation's Equipment Book Value on December 31, 2017
$353,500
Add : Kimmel’s Equipment with a book value
183400
Add : Allocation to Kimmel's equipment [$462,000 – 262,000]
200,000
Less : Amortization of Kimmel's equipment Allocation for 3 Years
[ ($200,000 / 10 years) x 3 years ]
(60,000)
Consolidated balance for the Equipment account as of December 31, 2017
$ 676,900
Particulars
Amount
Paar Corporation's Equipment Book Value on December 31, 2017
$353,500
Add : Kimmel’s Equipment with a book value
183400
Add : Allocation to Kimmel's equipment [$462,000 – 262,000]
200,000
Less : Amortization of Kimmel's equipment Allocation for 3 Years
[ ($200,000 / 10 years) x 3 years ]
(60,000)
Consolidated balance for the Equipment account as of December 31, 2017
$ 676,900
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