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Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paar’s...

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 $362,500 but a fair value of $499,000. Kimmel has equipment (10-year life) with a book value of $284,000 but a fair value of $419,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2017, Paar has equipment with a book value of $253,750 but a fair value of $411,250. Kimmel has equipment with a book value of $198,800 but a fair value of $366,300. What is the consolidated balance for the Equipment account as of December 31, 2017?

Multiple Choice

  • $547,050.

  • $452,550.

  • $587,550.

  • $777,550.

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Answer #1

ANSWER

Paar's equipment book value- 12/31/17 of $ 253750

Add kimmel's equipment book value- 12/31/17 of  $198800

Add (original acquisition - date allocation to kimmel's equipment) of ($419000 - $ 284000) = $135000

Less Amortisation of allocation ($135000 /10 years for 3 years)=($40500)

Consolidated Equipment = (Paar's equipment book value  +  kimmel's equipment book value  +  $135000 - Amortisation of allocation)

=($253,750+ $198800+$135000-$40500)

Consolidated Equipment of $ 5,47,050

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