Question

Reagan Corp. acquired one hundred percent of Ford Inc. on January 1, 2016, at a price in excess of the subsidiary's fair value. On that date, Reagan's equipment (ten-year life) had a book value of $360,000 but a fair value of $480,000. Ford had equipment (ten-year life) with a book value of $240,000 and a fair value of $350,000. Reagan used the equity method to record its investment in Ford. On December 31, 2018, Reagan had equipment with a book value of $250,000 and a fair value of $400,000. Ford had equipment with a book value of $170,000 and a fair value of $320,000. What is the consolidated balance for the Equipment account as of December 31, 2018? A. $387,000. B. $497,000. C. $508.000. D. $537,000.

Answer 1

B. $497,000

Step-by-step explanation:

Consolidated Balance of Equipment

Excess value at the acquisition $110,000

($350,000-$240000)

Book value as on Dec 31 2018 of Ford $170,000

Book value as on Dec 31 2018 of Regent $250,000

Less: excess depreciation -$33,000 ($110,000/10*3)

Consolidated balance of equipment $497,000