Question

1. Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2010 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.

Park Co Royce Co Book Value Book Value Value Current assets Equipment Buildings Liabilities Revenues Expenses Investment income $ 868.000 S 420.000 448,000 364,000 574,000 280.000 210.00 400.000 210,000 (546,000) (168,000) (168,000) (1,260,000) (560,000) 700.000 420.000 Not Given

What is the consolidated balance of the Equipment account at December 31, 2011?

Answer 1

Ans is $770,000 Explanation: Balance of Royce equipment = 364000 Balance of Park equipment = 280000 Add: additional fair value less depreciation(140000-14000) = 126000 Total consolidated balance of equipment = 770,000