Asked by albandari aljuaid on Apr 25, 2024
Verified
On January 1, 2020, Elva Corp. paid $750,000 for 80% of Fenton Co. when the book value of Fenton's net assets was $800,000. Fenton owned a building with a fair value of $150,000 and a book value of $120,000.Required: At what amount would the building appear on a consolidated balance sheet prepared immediately after the combination, under the acquisition method of accounting for business combinations?
Acquisition Method
A set of accounting procedures used for consolidating the financial statements of a parent company and its subsidiaries.
Fair Value
The estimated market value to sell an asset or the required payment to delegate a liability, during a structured transaction as of the specified valuation date.
- Learn the computation of purchase consideration and how to allocate it to acquired assets and liabilities at their fair values.
- Develop the ability to amalgamate the financial statements of a subsidiary with those of its parent company.
Verified Answer
KE
Kizzy Emphatic6 days ago
Final Answer :
All subsidiary identifiable assets and liabilities are consolidated at their full fair values on the date of acquisition. The amount the building would appear on a consolidated balance sheet prepared immediately after the combination is the building's fair value of $150,000.
Learning Objectives
- Learn the computation of purchase consideration and how to allocate it to acquired assets and liabilities at their fair values.
- Develop the ability to amalgamate the financial statements of a subsidiary with those of its parent company.