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13 August, 19:16

Red Co. acquired 100% of Green, Inc. on January 1, 2012. On that date, Green had inventory with a book value of $42,000 and a fair value of $52,000. This inventory had not yet been sold at December 31, 2012. Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000. Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2012 related to the acquisition allocations of Green?

A) $43,000.

B) $33,000.

C) $ 5,000.

D) $15,000.

E) 0.

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  1. 13 August, 19:57
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    D) $15,000.

    Explanation:

    190,000 excess of value Building amortized over 10 years: 19,000

    70,000 lesser value on Equipment amortized over 5 years: 14,000

    We will amortize the building at a rate of 19,000 dollar per year

    and we will amortize the equipment at 14,000 per year

    the inventory as still is in the company's possesion will also need to be adjsuted

    10,000 + 19,000 - 14,000 = 15,000
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