Question

Black Co. acquired 100% of Blue, Inc. on January 1, 2020. On that date, Blue had land with a book value of $38,000 and a fair value of $49,000. Also, on the date of acquisition, Blue had a building with a book value of $250,000 and a fair value of $460,000. Blue had equipment with a book value of $340,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2020 related to the acquisition allocations of Blue

Answer 1

Answer:

Black Co.

Total expenses for the year ended December 31, 2020 related to the acquisition allocations of Blue are:

= $102,000

Explanation:

a) Data and Calculations:

Assets of Blue Corporation:

                            Book Value         Fair Value   Depreciation Expense

Land                      $38,000               $49,000         $0

Building                250,000               460,000         46,000

Equipment            340,000              280,000         56,000

Total                   $628,000            $789,000      $102,000

Remaining useful life:

Building = 10 years

Equipment = 5 years

Straight-line Depreciation:

Building = $46,000 ($460,000/10)

Equipment = $56,000 ($280,000/5)