REFERENCE: Ref.03_05
Perry Company obtains 100% of the stock of Hurley Corporation on January 1,2009,for $3,800 cash.As of that date Hurley has the following trial balance;
SHAPE \* MERGEFORMAT
Any excess of consideration transferred over fair value is considered goodwill with an indefinite life.FIFO inventory valuation method is used.
-Compute the amount of Hurley's land that would be reported on a December 31,2009,consolidated balance sheet.

Question

REFERENCE: Ref.03_05
Perry Company obtains 100% of the stock of Hurley Corporation on January 1,2009,for $3,800 cash.As of that date Hurley has the following trial balance;
SHAPE \* MERGEFORMAT
  Any excess of consideration transferred over fair value is considered goodwill with an indefinite life.FIFO inventory valuation method is used.
-Compute the amount of Hurley's land that would be reported on a December 31,2009,consolidated balance sheet.

Quizplus · Accepted Answer

Since FIFO inventory valuation method is used and there are no adjustments mentioned, we can assume that the balance of inventory as of December 31, 2009, is the same as the balance as of January 1, 2009, which is $400. Also, the building and equipment are being depreciated over their useful lives, but no information is given about land being depreciated; hence, we can assume that the land has not decreased in value over the year. Therefore, the land balance on the consolidated balance sheet as of December 31, 2009, would be the same as the balance of land on the acquisition date, which is $1,300. Thus, the correct answer is C.

REFERENCE: Ref.03_05 Perry Company Obtains 100% of the Stock of Hurley Corporation