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Hamlen Corporation acquired 100 percent of Pink's Company's common stock on January 1, 2015. Balance sheet...

Hamlen Corporation acquired 100 percent of Pink's Company's common stock on January 1, 2015. Balance sheet data for the two companies immediately following the acquisition follow:

.....................................................Hamlen.................. Pink's

Cash.............................................$ 30,000 ..............$25,000

Accounts Receivable........................... 80,000 ................40,000

Inventory........................................ 150,000............... 55,000

Land.............................................. 65,000 ................40,000

Buildings and Equipment...................... 260,000............. 160,000

Less: Accumulated Depreciation............ (120,000)............. (50,000)

Investment in Pong Company Stock.......... 150,000

Total Assets...................................... $615,000 ........$270,000

Accounts Payable...............................$ 45,000.......... $ 33,000

Taxes Payable.................................... 20,000............... 8,000

Bonds Payable ................................... 200,000........... 100,000

Common Stock..................................... 50,000 ............20,000

Retained Earnings................................ 300,000........... 109,000

Total Liabilities and Stockholder's Equity.....$615,000 .........$270,000

At the date of the combination, the book values of Pink's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Hamlen Corporation was estimated at $80,000 immediately prior to the acquisition.

Based on the preceding information, what amount of land will be reported in the consolidated balance sheet prepared immediately after the business combination?

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Answer #1

IFRS 3 on Business Combination provides accounting for business combination. Standard provides that an acquirer shall measure the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values. Standard makes is clear that all the assets and liabilities including non-recorded but identifiable assets of an acquiree shall be fair valued and recorded at such fair value.

Following value shall be presented in Consolidated Balance Sheet of Hamlen Corporation-

Land at book value in Hamlen Corporation- 65,000

Land at fair value of Pink Company- 50,000

Total Land Value in consolidated Balance Sheet- 115,000.

Note: Assumed that Hamlen Corporation follows cost method for inventory and investment property.

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