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Sanders acquired 100% of Clinton on January 1, 2017. The transaction was not a bargain purchase....

Sanders acquired 100% of Clinton on January 1, 2017. The transaction was not a bargain purchase. On the date of the acquisition, Clinton's Building account had a net book value of 3,973,264 and a fair value of 4,186,268. As of 1/1/2017, Clinton's buildings have a remaining life of 10 years and are depreciated on a straight-line basis with no salvage value.

When preparing Sanders' consolidated financial statements for 2017, what AAP adjustment must be made for Depreciation expense?

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Answer #1

Adjustment must be made for Depreciation expense = (Fair value - Net book value) / Remaining useful life

= ( 4,186,268 - 3,973,264) / 10

= $ 21,300

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