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10 July, 11:39

Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paar's equipment (10-year remaining life) has a book value of $420,000 but a fair value of $520,000. Kimmel has equipment (10-year remaining life) with a book value of $272,000 but a fair value of $400,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2017, Paar has equipment with a book value of $294,000 but a fair value of $445,200. Kimmel has equipment with a book value of $190,400 but a fair value of $357,000. The consolidated balance for the Equipment account as of December 31, 2017 is $574,000. What would be the impact on consolidated balance for the Equipment account as of December 31, 2017 if the parent had applied the initial value method rather than the equity method?

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  1. 10 July, 13:19
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    The method the parent use will have no effect on consolidated total because it is only for internal reporting purpose.

    Explanation:

    Paar's equipment book value-12/31/15 of $294,000

    Add Kimmel's equipment book value-12/31/15 of $190,400

    Add Original acquisition-date allocation to

    Kimmel's equipment of ($400,000 - $272,000) = $128,000

    Less Amortization of Allocation

    ($128,000/10 years * 3 years) = ($38,400)

    Equals Consolidated Equipment of $574,000

    The method the parent use will have no effect on consolidated total because it is only for internal reporting purpose.
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Home » Business » Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paar's equipment (10-year remaining life) has a book value of $420,000 but a fair value of $520,000.
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