Question

On december 31, planet company acquired 80% of the voting common stock of star company by issuing 100,000 shares of its own common stock (fair value $8/share). in the acquisition, planet paid legal fees in the amount of $15,000 and paid sec registration fees of $10,000. the book value of star on december 31 was $700,000. star's only balance sheet item with a fair value different from book value was a building. the building had a book value of $100,000 and a fair value of $150,000. in planet's december 31 consolidating work paper elimination entry, what part of star's stockholders' equity is eliminated?

Answer 1

Answer:

Building with fair value of $150,000

Explanation :

In the consolidation work paper elimination, we eliminate the Equity or Net Identifiable assets that exist in Star Company at the Acquisition Date.

The Building with fair value of $150,000 was the only balance sheet item existing thus this is ultimately the Net Identifiable Assets that would be eliminated.