Paro Company purchased 80% of the voting common stock of Sabon Company for $900,000.There are no liabilities.The following book and fair values are available for Sabon:
$\begin{array}{lrr}
& \text { Book Value } & \text { Fair Value } \
\text { Current assets } & \$ 100,000 & \$ 200,000 \
\text { Land and building } & 200,000 & 200,000 \
\text { Machinery } & 300,000 & 600,000 \
\text { Goodwill } & 100,000 & ?
\end{array}$

The machinery will appear on the consolidated balance sheet at ____.
A)$600,000
B)$540,000
C)$480,000
D)$300,000

Question

Paro Company purchased 80% of the voting common stock of Sabon Company for $900,000.There are no liabilities.The following book and fair values are available for Sabon: 
$\begin{array}{lrr}
& \text { Book Value } & \text { Fair Value } \
\text { Current assets } & \$ 100,000 & \$ 200,000 \
\text { Land and building } & 200,000 & 200,000 \
\text { Machinery } & 300,000 & 600,000 \
\text { Goodwill } & 100,000 & ? 
\end{array}$

The machinery will appear on the consolidated balance sheet at ____.
A)$600,000
B)$540,000
C)$480,000
D)$300,000

Quizplus · Accepted Answer

The machinery will appear on the consolidated balance sheet at its fair value of $600,000 because in a consolidation, the assets of the acquired company are reported at their fair values.

Paro Company Purchased 80% of the Voting Common Stock of Sabon