Question

Goehler, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2017, at an amount in excess of Kenneth's fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Goehler has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2018, Goehler has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000.

18) If Goehler applies the equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2018?

A) $1,104,000.

B) $1,080,000.

C) $1,468,000.

D) $1,475,000.

E) $1,100,000.

19) If Goehler applies the partial equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2018?

A) $1,475,000.

B) $1,080,000.

C) $1,468,000.

D) $1,100,000.

E) $1,104,000.

20) If Goehler applies the initial value method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2018?

A) $1,080,000.

B) $1,104,000.

C) $1,475,000.

D) $1,100,000.

E) $1,468,000.

Please show works, Thanks!

Answer 1

Answer :-

18 ) :-

The answer is Option ( A ) .$1,104,000 .

Particulars	Amount
Goehler equipment with a book value	$975,000
Kenneth equipment	$105,000
Original purchase price allocated to Kenneth's equipment	= $120,000 - $90,000 = $30,000
Amortization of allocation	= [ $30,000 * 2 ] / 10 = $60,000 / 10 = $6,000
Consolidated balance for the Equipment	= $975,000 + $105,000 + $30,000 - $6,000 = $1,110,000 - $6,000 = $1,104,000

19 ) :-

The answer is Option ( E ) .$1,104,000 .

Particulars	Amount
Goehler equipment with a book value	$975,000
Kenneth equipment	$105,000
Original purchase price allocated to Kenneth's equipment	= $120,000 - $90,000 = $30,000
Amortization of allocation	= [ $30,000 * 2 ] / 10 = $60,000 / 10 = $6,000
Consolidated balance for the Equipment	= $975,000 + $105,000 + $30,000 - $6,000 = $1,110,000 - $6,000 = $1,104,000

20 ) :-

The answer is Option ( B ) .$1,104,000 .

Particulars	Amount
Goehler equipment with a book value	$975,000
Kenneth equipment	$105,000
Original purchase price allocated to Kenneth's equipment	= $120,000 - $90,000 = $30,000
Amortization of allocation	= [ $30,000 * 2 ] / 10 = $60,000 / 10 = $6,000
Consolidated balance for the Equipment	= $975,000 + $105,000 + $30,000 - $6,000 = $1,110,000 - $6,000 = $1,104,000