Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2012. At that date, Glen owns only three assets and has no liabilities: If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary's Equipment in a consolidation at December 31, 2014, assuming the book value of the equipment at that date is still $80,000?

Question

Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2012. At that date, Glen owns only three assets and has no liabilities:  If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary's Equipment in a consolidation at December 31, 2014, assuming the book value of the equipment at that date is still $80,000?

Quizplus · Accepted Answer

Fair Value at Acquisition ($75,000) + Amortization [($5,000/10) × 3] = $76,500