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 $420,000 but a fair value of $520,000. Kimmel has equipment (10-year life) with a book value of $272,000 but a fair value of $400,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2014, Paar has equipment with a book value of $294,000 but a fair value of $445,200. Kimmel has equipment with a book value of $190,400 but a fair value of $357,000. What is the consolidated balance for the Equipment account as of December 31, 2014?
A. $612,600.
B. $574,000.
C. $802,200.
D. $484,400.

Answer 1

Answer:

B)  574,000

Explanation:

Equipment book of Paar value on december 31/14 of $294,000.-  

Add Kimmels equipment book value on december 31/14 of $190,00

Add original acquisition-date allocation to Kimmel´s equipment of ($400,000 - $272,000) = $128,000

Less Amortization of alloction ($128,000 / 10 years for 3 years) = (38,400)

Eqcuals consolidated equipment of $574,000