Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2014 when Park's book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the following selected figures were reported by the two companies. Additionally, no dividends have been paid. What is the consolidated balance of the Equipment account at December 31, 2015?

Question

Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2014 when Park's book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the following selected figures were reported by the two companies. Additionally, no dividends have been paid.  What is the consolidated balance of the Equipment account at December 31, 2015?

Quizplus · Accepted Answer

[Parent's Equipment $364,000] + [Sub's Equipment $280,000] + [Excess Amortization Remaining $140,000 - $14,000] = $770,000

Royce Co Acquired 60% of Park Co