Question

When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70, 000 and a fair value of $100, 000. What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?
A) $ 52, 500.
B) $ 70, 000.
C) $ 75, 000.
D) $ 92, 500.
E) $ 100, 000.

Answer 1

Answer:

E) $ 100, 000.

Explanation:

Under consolidation when the share holding is 50% or more, then it is a parent, subsidiary relationship and in that case equity method is followed.

All the assets of subsidiary are reported in the balance sheet of holding company also. This is to be reported at fair market value.

The minority shareholding is calculated for their share and shown separately.

But all assets are recorded at fair value.

Thus, the correct option shall be:

$100,000 being the fair value of land.