Question

On January 1, 2017 Preibus acquired 100 % of Spicer. This acquisition was not a bargain purchase. On the date of acquisition, Spicer's Equipment had a net book value of 1,600,000 and a fair value of 1,723,000. Preibus determined that Spicer's equipment had a remaining life of 5 years at the date of acquisition. What is the consolidation adjustment (in addition to adding the two trial balance amounts together) that must be made to the Equipment account when preparing consolidated statements for Preibus as of 12/31/2017

Answer 1

Answer:

Dr Investment in Spicer $123,000

Cr Equipment $123,000

Dr Equipment $24,600

Cr Depreciation expense $24,600

Explanation:

Preparation of the consolidation adjustment that must be made to the Equipment account when preparing consolidated statements for Preibus as of 12/31/2017

Dr Investment in Spicer $123,000

Cr Equipment $123,000

(1,600,000-1,723,000)

(To record the equipment at their fair value)

Dr Equipment $24,600

Cr Depreciation expense $24,600

($123,000/5 years)

(To record excess Depreciation charged on overvalued Equipment)