Question

Velway acquired Joker Inc. on January 1, 2018. The parent paid more than the fair value of the subsidiary's net assets. On that date, Velway had equipment with a book value of $500,000 and a fair value of $640,000. Joker had equipment with a book value of $400,000 and a fair value of $470,000. Joker decided to use push-down accounting. Immediately after the acquisition, what Equipment amount would appear on Joker's separate balance sheet and on Velway’s consolidated balance sheet, respectively? $400,000 and $970,000 $400,000 and $900,000 $470,000 and $970,000 $470,000 and $900,000

Answer 1

On Joker's separate balance sheet equipment amount would appear

= $470,000

On Velway consolidated balance sheet equipment amount would appear

= $970,000

Step-by-step explanation:

Given:

Velway Book value of the equipment = $500,000

Velway Fair value of the equipment = $640,000

Joker book value of the equipment = $400,000

Joker Fair value of the equipment = $470,000

Now,

On Joker's separate balance sheet equipment amount would appear

= Fair value of equipment

= $470,000

And,

On Velway consolidated balance sheet equipment amount would appear as

= Book value of equipment of Velway + Fair value of equipment of joker

= $500,000 + $470,000

= $970,000