REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2009.At that date,Glen owns only three assets and has no liabilities:
-If Watkins pays $400,000 in cash for Glen,what amount would be represented as the subsidiary's Building in a consolidation at December 31,2011,assuming the book value at that date is still $200,000?

Question

REFERENCE: Ref.03_12
Watkins,Inc.acquires all of the outstanding stock of Glen Corporation on January 1,2009.At that date,Glen owns only three assets and has no liabilities: 
-If Watkins pays $400,000 in cash for Glen,what amount would be represented as the subsidiary's Building in a consolidation at December 31,2011,assuming the book value at that date is still $200,000?

Quizplus · Accepted Answer

Since Watkins acquired all the outstanding stock of Glen Corporation, it owns all the assets and liabilities of Glen. Therefore, in the consolidation, the building would be represented at the fair value of $285,000, which is the total cost of the acquisition ($400,000) minus the book value of the building at the acquisition date ($115,000 = $200,000 - $85,000 accumulated depreciation from 2009 to 2011).

REFERENCE: Ref.03_12 Watkins,Inc.acquires All of the Outstanding Stock of Glen Corporation on Corporation