Question

.Goehler, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2017, at an amount in excess of Kenneth's fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Goehler has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2018, Goehler has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000. If Goehler applies the equity method in accounting for Kenneth, what is the consolidated balanc e for the Equipment account as of December 31, 2018

Answer 1

$1,104,000

Explanation:

The computation of the consolidated valance of the equipment account as on Dec 31, 2018 is shown below:

As per the data given in the question,

Particulars Amount

Equipment with a book value $975,000

Add: Kenneth Equipment = $105,000

Add: Original purchase price for Kenneth = $120,000 - $90,000 = $30,000

Less: Amortization of allocation = ($30,000 × 2) ÷ 10 = $6,000

Consolidated balance for equipment $1,104,000

We simply added the

= $975,000 + $105,000 + $30,000 - $6,000

= $1,104,000