REFERENCE: Ref.03_08
Goehler,Inc.acquires all of the voting stock of Kenneth,Inc.on January 4,2009,at a price in excess of Kenneth's fair value.On that date,Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life).Goehler has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life).On December 31,2010,Goehler has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000.
-If Goehler applies the partial equity method in accounting for Kenneth,what is the consolidated balance for the Equipment account as of December 31,2010?

Question

Quizplus · Accepted Answer

Under the partial equity method, Goehler's share of Kenneth's equipment fair value gain or loss is recognized in a separate equity account. 
As of December 31, 2010: 
- Kenneth's equipment fair value: $125,000 
- Goehler's share of the gain on Kenneth's equipment: [(125,000-90,000) x 1/2] = $17,500 
- Consolidated equipment fair value: (1,350,000 + 125,000) = $1,475,000 
- Consolidated equipment book value: (975,000 + 52,500 + 105,000) = $1,132,500 
- Consolidated Equipment Equity: ([1,475,000 - 1,132,500] - 17,500) = $325,000 
- Consolidated Equipment account: (1,132,500 + 325,000) = $1,457,500 
Therefore, the consolidated balance for the Equipment account as of December 31, 2010, is $1,104,000 (Option B).

REFERENCE: Ref.03_08 Goehler,Inc.acquires All of the Voting Stock of Kenneth,Inc.on January 4,2009,at