Question

Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2018. On that date, Paar’s equipment (10-year remaining life) has a book value of $382,500 but a fair value of $548,500. Kimmel has equipment (10-year remaining life) with a book value of $270,000 but a fair value of $432,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2020, Paar has equipment with a book value of $267,750 but a fair value of $476,750. Kimmel has equipment with a book value of $189,000 but a fair value of $412,800. What is the consolidated balance for the Equipment account as of December 31, 2020?

Answer 1

The consolidated balance for the Equipment account as of December 31, 2020, is $889,550.

Step-by-step explanation:

The consolidated balance for the Equipment account as of December 31, 2020, is the sum of the equipment balances from both Paar Corporation and Kimmel, Inc. Based on the information provided, Paar's equipment has a fair value of $476,750 and Kimmel's equipment has a fair value of $412,800. Therefore, the consolidated balance for the Equipment account is $476,750 + $412,800 = $889,550.

Answer 2

The consolidated balance for the Equipment account as of December 31, 2020, considering both book values and fair values, is $456,750 for book value and $889,550 for fair value.

How to solve

To calculate the consolidated balance for the Equipment account as of December 31, 2020, in the consolidated financial statements of Paar Corporation and its subsidiary Kimmel, Inc., we need to consider the adjustments based on the equity method and the fair value of the equipment.

Firstly, we'll sum up the book values and fair values of equipment for both Paar and Kimmel separately as of December 31, 2020.

Paar's Equipment:

Book Value = $267,750

Fair Value = $476,750

Kimmel's Equipment:

Book Value = $189,000

Fair Value = $412,800

Next, we'll sum up the consolidated book value and fair value for the Equipment account:

Consolidated Book Value = Paar's Book Value + Kimmel's Book Value

Consolidated Book Value = $267,750 (Paar) + $189,000 (Kimmel) = $456,750

Consolidated Fair Value = Paar's Fair Value + Kimmel's Fair Value

Consolidated Fair Value = $476,750 (Paar) + $412,800 (Kimmel) = $889,550

Therefore, the consolidated balance for the Equipment account as of December 31, 2020, considering both book values and fair values, is $456,750 for book value and $889,550 for fair value.