Reeder Corp. acquired one hundred percent of O'Neill Inc. on January 1, 2019, at a price in excess of the subsidiary's fair value. On that date, Reeder's equipment (ten-year life) had a book value of $380,000 but a fair value of $460,000. O'Neill had equipment (ten-year life) with a book value of $240,000 and a fair value of $370,000. Reeder used the partial equity method to record its investment in O'Neill. On December 31, 2021, Reeder had equipment with a book value of $270,000 and a fair value of $400,000. O'Neill had equipment with a book value of $180,000 and a fair value of $300,000. What is the consolidated balance for the Equipment account as of December 31, 2021?
A) $450,000.
B) $531,000.
C) $541.000.
D) $567,000.
E) $580,000.

Question

Quizplus · Accepted Answer

The consolidated balance for the Equipment account as of December 31, 2021, is $541,000. This is calculated by adding the book values of the equipment of both companies ($270,000 + $180,000 = $450,000) and then adding the difference between the fair values and book values of the equipment of both companies ($400,000 - $270,000 = $130,000 + $300,000 - $180,000 = $150,000).