On January 1, 2013, Prima Corporation acquired 80 percent of Sunder Corporation's voting common stock.
Sunders's buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the time of
Acquisition.At what amount will Sunder's buildings and equipment will be reported in the consolidated statements ?

Question

Quizplus · Accepted Answer

When acquiring a subsidiary, the parent company must recognize the fair value of the assets and liabilities acquired. In this case, Sunder's buildings and equipment had a fair value of $350,000, which is $50,000 higher than their book value of $300,000. Since Prima Corporation acquired 80% of Sunder Corporation's voting common stock, it has control and must therefore include it in its consolidated financial statements.

The consolidated financial statements should reflect the fair value of Sunder's buildings and equipment, which is $350,000. Therefore, the correct answer is A) $350,000.

On January 1, 2013, Prima Corporation Acquired 80 Percent of Sunder