A parent company acquires all of a subsidiary's voting stock at the beginning of 2018. At the date of acquisition, the subsidiary's equipment had a book value of $40 million and a fair value of $25 million. The equipment had a 10-year remaining life, straight-line. Consolidation eliminating entry (R), on the consolidation working paper for 2021, reduces the net equipment account by what amount?

Question

Quizplus · Accepted Answer

2021 is the fourth year since acquisition. Eliminating entry (R) recognizes the revaluation as of the beginning of the year. $15 million - [($15 million/10) x 3] = $10.5 million, which reduces the equipment account.

A Parent Company Acquires All of a Subsidiary's Voting Stock