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28 August, 13:08

Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 20X9. On the date of acquisition, Princeton held land with a book value of $150,000 and a fair value of $300,000; Sheffield held land with a book value of $500,000 and fair value of $500,000. At what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?

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  1. 28 August, 14:43
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    Land in the consolidated balance sheet 650,000

    Explanation:

    In the consolidated balance sheet, the land of the controlled firm will be at fair value. But, the parent land will be kept at cost as there wasn't a transaction with a third party to validate the market value. Because of this and according to the conservatism principles about assets valuation the aldn must be at cost.

    Land:

    Princeton 150,000 book value

    Sheffiled 500,000 market value

    Total 650,000
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