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 issued common stock valued at $410,000 for Glen,rather than paying cash,in a pooling of interests on June 15,1999,at what amount would the subsidiary's Equipment be represented in a December 31,2009,consolidation,assuming no acquisitions or disposals of buildings or equipment?

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 issued common stock valued at $410,000 for Glen,rather than paying cash,in a pooling of interests on June 15,1999,at what amount would the subsidiary's Equipment be represented in a December 31,2009,consolidation,assuming no acquisitions or disposals of buildings or equipment?

Quizplus · Accepted Answer

Since a pooling of interests is used, Watkins will record the assets and liabilities of Glen at their carrying values. Therefore, the Equipment will be recorded at its original cost of $80,000 and will not be adjusted to fair value. In a consolidation, the Equipment will be eliminated and Glen's net assets will be added to Watkins' net assets at the carrying amount of $410,000. Therefore, the Equipment will not be represented in the consolidation.

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