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McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This...

McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan’s total acquisition-date fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:

Book Value Fair Value
Buildings (10-year life) $ 10,000 $ 8,000
Equipment (4-year life) 14,000 18,000
Land 5,000 12,000

Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.

1. In consolidation at January 1, 2019, what adjustment is necessary for Hogan's Land account?

Multiple Choice

a. $7,000 increase.

b. $7,000 decrease.

c. $6,300 increase.

d. $6,300 decrease.

e. No adjustment is necessary.

2. In consolidation at December 31, 2019, what adjustment is necessary for Hogan's Land account?

Multiple Choice

a. $8,000 decrease.

b. $7,000 increase.

c. $6,300 increase.

d. $6,300 decrease.

e. No adjustment is necessary.

3. In consolidation at December 31, 2020, what adjustment is necessary for Hogan's Land account?

Multiple Choice

a. $7,000 decrease.

b. $7,000 increase.

c. $6,300 increase.

d. $6,300 decrease.

e. No adjustment is necessary.

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Homework Answers

Answer #1

1). In consolidation at January 1, 2019, increase of $7,000($12,000-$5,000) is necessary to be adjusted for Hogan's Land account

Therefore answer is (a.) $7,000 increase.

2)In consolidation at December 31, 2019, adjustment is necessary for increase of 7,000$ for Hogan's Land account

Therefore answer is option(b) $7,000 increase.

3) n consolidation at December 31, 2020, adjustment is necessary for $7,000 increase for Hogan's Land account

Therefore answer is option (b) $7,000 increase.

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