A subsidiary has plant assets with a fair value of $70 million and book value of $60 million at the date of acquisition. The plant assets have a remaining life, as of the date of acquisition, of 20 years, straight-line. You are consolidating the accounts at the end of the third year since acquisition, and the subsidiary still owns the plant assets. The amount by which the plant assets are revalued in eliminating entry (R) is:

Question

Quizplus · Accepted Answer

Entry (R) recognizes revaluation as of the beginning of the third year. Total revaluation was $70 million - $60 million = $10 million, and the revaluation declines by $10 million/20 = $500,000 each year. $10 million - (2 x $500,000) = $9 million.

A Subsidiary Has Plant Assets with a Fair Value of $70