Question

Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2018. On that date, Paar’s...

Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2018. On that date, Paar’s equipment (10-year remaining life) has a book value of $335,000 but a fair value of $468,000. Kimmel has equipment (10-year remaining life) with a book value of $258,000 but a fair value of $391,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2020, Paar has equipment with a book value of $234,500 but a fair value of $390,000. Kimmel has equipment with a book value of $180,600 but a fair value of $348,100. What is the consolidated balance for the Equipment account as of December 31, 2020?

Multiple Choice

  • $738,100.

  • $548,100.

  • $415,100.

  • $508,200.

Business   Accounting   
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Answer #1
Answer:
Particulars Amount (in $)
Book Value of Paar's Equipment $ 234,500
Add: Book Value of Kimmel's Equipment $ 180,600
Add: Kimmel's excess of Fair value over book Value
              ( $ 391,000 (-) $ 258,000 )		 $ 133,000
Less:   Amortization
                  ( $ 133,000 / 10 Years ) x 3 Years		 ($ 39,900)
Gross Profit $ 508,200
Option (d) is Correct
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