Question

Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paar’s equipment (10-year life) has a book value of $532,500 but a fair value of $644,500. Kimmel has equipment (10-year life) with a book value of $273,000 but a fair value of $392,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2017, Paar has equipment with a book value of $372,750 but a fair value of $517,950. Kimmel has equipment with a book value of $191,100 but a fair value of $364,200. What is the consolidated balance for the Equipment account as of December 31, 2017?

Answer 1

Answer: $647,150

Step-by-step explanation:

On December 31, 2017

Paar’s equipment has a book value = $372,750

Kimmel's equipment with a book value = $191,100

Equipment fair value more than book value = ($392,000 - $273,000)

= $119,000

`Amortization\ of\ all\ allocation= (119,000)/(10)*3\ years`

= $35,700

consolidated balance for the Equipment account as of December 31, 2017:

= Paar’s equipment has a book value + Kimmel's equipment with a book value + Equipment fair value more than book value - Amortization of all allocation

= $372,750 + $191,100 + $119,000 - $35,700

= $647,150