Wellington Company purchased 100% of the ordinary shares of Royal Company on December 31, 2014. The cost of the investment was equal to the book value of the subsidiary's net assets. Selected account balances from the separate statements of financial position of Wellington and Royal on December 31, 2014 are as follows The amount of plant assets, net reported on the consolidation statement of financial position at December 31, 2014 is

Question

Wellington Company purchased 100% of the ordinary shares of Royal Company on December 31, 2014. The cost of the investment was equal to the book value of the subsidiary's net assets. Selected account balances from the separate statements of financial position of Wellington and Royal on December 31, 2014 are as follows  The amount of plant assets, net reported on the consolidation statement of financial position at December 31, 2014 is

Quizplus · Accepted Answer

Since the cost of investment is equal to the book value of the subsidiary's net assets, the amounts for each line item on Royal's separate statement of financial position can be directly used in the consolidation process. Therefore, the consolidated plant assets, net would be calculated as follows:
Plant Assets, Net = Wellington's Plant Assets, Net + Royal's Plant Assets, Net
= £2,070,000 + £2,110,000
= £4,180,000
Therefore, the correct answer is C.

Wellington Company Purchased 100% of the Ordinary Shares of Royal