Question

# Crawford Corporation acquires Nashville, Inc. The parent pays more for it than the fair value of...

 Crawford Corporation acquires Nashville, Inc. The parent pays more for it than the fair value of the subsidiary’s net assets. On the acquisition date, Crawford has equipment with a book value of \$418,000 and a fair value of \$592,000. Nashville has equipment with a book value of \$302,500 and a fair value of \$366,000. Nashville is going to use push-down accounting. Immediately after the acquisition, what amounts in the Equipment account appear on Nashville’s separate balance sheet and on the consolidated balance sheet?

\$302,500 and \$894,500.

\$366,000 and \$958,000.

\$366,000 and \$784,000.

\$302,500 and \$720,500.

Ans - \$366000 and \$784000 (Option 3rd)

In case of Nashville, excess of Fair value over Book value = (\$366000 - \$302500) = \$63500. Since Nashville is going to use push-down accounting, the value of equipment in Nashville's separate balance sheet will increased to fair value of \$366000.
Whereas in Consolidated balance sheet, value of equipment = (\$418000 book value of Crawford + \$366000 Fair value of Nashville) = \$784000

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