Willkom Corporation buys 100% of Szabo Inc. on January 1, 2018, at a price in excess of the subsidiary's fair market value. On that date, Willkom's equipment (10 year life) has a book value of $600,000 but a fair market value of $800,000. Szabo has equipment (10 year life) with a book value of $400,000 but a fair market value of $600,000. Willkom uses the partial equity method to record its investment in Szabo. On December 31, 2020, Willkom has equipment with a book value of $420,000 but a fair market value of $660,000. Szabo has equipment with a book value of $280,000 buy a fair market value of $540,000. What is the consolidated balance for the equipment account as of December 31, 2020?

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Business

Naomi Randall

29 April, 20:48

Willkom Corporation buys 100% of Szabo Inc. on January 1, 2018, at a price in excess of the subsidiary's fair market value. On that date, Willkom's equipment (10 year life) has a book value of $600,000 but a fair market value of $800,000. Szabo has equipment (10 year life) with a book value of $400,000 but a fair market value of $600,000. Willkom uses the partial equity method to record its investment in Szabo. On December 31, 2020, Willkom has equipment with a book value of $420,000 but a fair market value of $660,000. Szabo has equipment with a book value of $280,000 buy a fair market value of $540,000. What is the consolidated balance for the equipment account as of December 31, 2020?

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Slim · Answer 1

The consolidated balance for the equipment account as of December 31, 2020 is $652,000.

Explanation:

the original price allocation = $660,000 - $420,000

= $24000

(240000/10years) * 3 years = $72,000

consolidated equipment

= book value + other company book value + original purchase price allocation - amortization of allocation

= $420,000 + $280,000 + $24000 - $72,000

= $652,000

Therefore, The consolidated balance for the equipment account as of December 31, 2020 is $652,000.