Led Ltd acquired 100% of Zeppelin Ltd on 30 June 20X0 by paying $7 million cash.At that date the net assets of Zeppelin Ltd was as follows:
$$\begin{array} { l r r }
& \text { Recorded amount } & \text { Fair value } \
\text { Total assets } & \$ 9 \text { million } & \$ 10 \text { million } \
\text { Total liabilities } & \$ 1 \text { million } & \$ 1 \text { million } \
\text { Net assets } & \$ 8 \text { million } & \$ 9 \text { million }
\end{array}$$
Total assets comprise buildings of $6 million, equipment of $3 million and accounts receivable of $1 million.All these figures are fair values.What is the recorded amount of buildings in Led Ltd's consolidated financial statements for the year ended 30 June 20X0? Assume no asset revaluations.
A)$6 million
B)$3 million
C)$2 million
D)$4.66 million

Question

Led Ltd acquired 100% of Zeppelin Ltd on 30 June 20X0 by paying $7 million cash.At that date the net assets of Zeppelin Ltd was as follows:
$$\begin{array} { l r r } 
& \text { Recorded amount } & \text { Fair value } \
\text { Total assets } & \$ 9 \text { million } & \$ 10 \text { million } \
\text { Total liabilities } & \$ 1 \text { million } & \$ 1 \text { million } \
\text { Net assets } & \$ 8 \text { million } & \$ 9 \text { million }
\end{array}$$
Total assets comprise buildings of $6 million, equipment of $3 million and accounts receivable of $1 million.All these figures are fair values.What is the recorded amount of buildings in Led Ltd's consolidated financial statements for the year ended 30 June 20X0? Assume no asset revaluations.
A)$6 million
B)$3 million
C)$2 million
D)$4.66 million

Quizplus · Accepted Answer

In the consolidated financial statements, the assets acquired in a business combination are recorded at their fair values at the acquisition date. Since the buildings have a fair value of $6 million, this is the amount that will be recorded in Led Ltd's consolidated financial statements for the year ended 30 June 20X0.

Led Ltd Acquired 100% of Zeppelin Ltd on 30 June