Question

On January 1, 2014, Penelope Company acquired a 100% interest in Leah Company for $200,000 cash. On January 1, 2014, Leah Company had the following assets and liabilities: Book Value Fair Value Cash $10,000 $10,000 Accounts Receivable 30,000 35,000 Inventory 40,000 50,000 Plant Assets 60,000 80,000 Total Assets $140,000 $175,000 Liabilities $25,000 $25,000 Capital Stock 100,000 Retained Earnings 15,000 Total Liabilities & Stockholders' Equity $140,000 Penelope used push down accounting to account for the acquisition. The total amount of push-down capital reported on Leah’s books after the push-down entry will be:

Answer 1

Answer to question

total amount of push-down capital reported on Leah’s books after the push-down entry will be
Net Assets aquired	Assets	Book Value	Fair Value
	Cash	10000	10000
Accounts Receivable	30000	35000
Inventory	40000	50000
Plant Assets	60000	80000
Total Assets	140000	175000
Liabilities	25000	25000
Net Assets	115000	150000
Paument	Cash		200000
Total amount of push-down capital	Goodwill	50000
Note
In Push down accounting target company's assest and liability recorded at purchase price i.e. Fair Value and not at Historical cost