Question

Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paar’s...

Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paar’s equipment (10-year life) has a book value of $352,500 but a fair value of $507,500. Kimmel has equipment (10-year life) with a book value of $250,000 but a fair value of $408,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2017, Paar has equipment with a book value of $246,750 but a fair value of $434,950. Kimmel has equipment with a book value of $175,000 but a fair value of $383,700. What is the consolidated balance for the Equipment account as of December 31, 2017?

a)$818,650.

b)421,750

c)579,750

d)532,350

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Answer #1

The Answer is “ D. 532,350 “

Particulars

Amount

Paar Corporation's Equipment Book Value on December 31, 2017

$246,750

Add : Kimmel’s Equipment with a book value

175,000

Add : Allocation to Kimmel's equipment [$408,000 – 250,000]

158,000

Less : Amortization of Kimmel's equipment Allocation for 3 Years [ ($158,000 / 10 years) x 3 years ]

(47,400)

Consolidated balance for the Equipment account as of December 31, 2017

$532,350

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