Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 20X9. On the date of acquisition, Princeton held land with a book value of $150,000 and a fair value of $300,000; Sheffield held land with a book value of $500,000 and fair value of $500,000. At what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?

Question

Business

Emery Robinson

25 August, 18:31

Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 20X9. On the date of acquisition, Princeton held land with a book value of $150,000 and a fair value of $300,000; Sheffield held land with a book value of $500,000 and fair value of $500,000. At what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?

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Tiffany Weiss · Answer 1

Land in the consolidated balance sheet 650,000

Explanation:

In the consolidated balance sheet, the land of the controlled firm will be at fair value. But, the parent land will be kept at cost as there wasn't a transaction with a third party to validate the market value. Because of this and according to the conservatism principles about assets valuation the aldn must be at cost.

Land:

Princeton 150,000 book value

Sheffiled 500,000 market value

Total 650,000