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12 March, 10:58

Mittelstaedt Inc., buys 60 percent of the outstanding stock of Sherry, Inc. Sherry owns a piece of land that cost $223,000 but had a fair value of $526,000 at the acquisition date. What value should be attributed to this land in a consolidated balance sheet at the date of takeover?

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  1. 12 March, 14:15
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    Fair Value 549,000

    Explanation:

    The International accounting standard IAS 16 says that the asset must be reported at the fair value in the financial statement regardless of whether the company is acquired by another company or not. So the correct treatment of this asset would be to record it at fair value both in the consolidated financial statement and individual financial statements.
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