Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance; Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. Compute the amount of Hurley's equipment that would be reported in a December 31, 2010, consolidated balance sheet.

Question

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2010, for $3,800 cash. As of that date Hurley has the following trial balance;  Any excess of consideration transferred over fair value of net assets acquired is considered goodwill with an indefinite life. FIFO inventory valuation method is used. Compute the amount of Hurley's equipment that would be reported in a December 31, 2010, consolidated balance sheet.

Quizplus · Accepted Answer

To determine the amount of Hurley's equipment to be reported in the consolidated balance sheet, we need to adjust the book value of equipment for any appreciations or impairments and allocate the excess consideration to goodwill.
Given that the fair value of Hurley's equipment is $1,125, which is higher than its book value of $1,000, we need to adjust it by adding an appreciation of $125. Therefore, the adjusted value of the equipment will be $1,125 for consolidation purposes.
Hence, the correct answer is D) $1,125.

Perry Company Acquires 100% of the Stock of Hurley Corporation