Question

Mittelstaedt Inc., buys 60 percent of the outstanding stock of Sherry, Inc. Sherry owns a piece of land that cost $212,000 but had a fair value of $549,000 at the acquisition date. What value should be attributed to this land in a consolidated balance sheet at the date of takeover?

$127,200.
$549,000.
$421,800.
$337,000.

Answer 1

$549,000.

Step-by-step explanation:

Under the consolidation process, when there is a holding more than 50% then it is a holding subsidiary all the balances of subsidiary are included in the balance sheet of holding company.

All the assets are generally recorded at market value or if recorded at cost then the revenue or cost of acquisition is adjusted.

Since in the given instance holding is more than 60% all the assets will be recorded at market value.

Therefore, correct option is : $549,000