Reference no: EM132480492

Question 1 - Royce Co. acquired 60% of Park Co. for $420,000 on December 31, 2019 when Park's book value was $560,000. The Royce stock was not actively traded. On the date of acquisition, Park had equipment (with a ten-year life) that was undervalued in the financial records by $140,000. One year later, the two companies provided the selected amounts shown below. Additionally, no dividends have been paid.

Royce Co. Park Co. Book Value Book Value Fair Value

Current assets $868,000 $420,000 $448,000

Equipment 364,000 280,000 400,000

Buildings 574,000 210,000 210,000

Liabilities (546,000) (168,000) (168,000)

Revenues (1,260,000) (560,000)

Expenses 700,000 420,000

Investment income Not Given

What is the consolidated balance of the Equipment account at December 31, 2020?

$775,600.

$644,400.

$719,600.

$784,000.

$700,000

Question 2 - McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan's total acquisition-date fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:

Book Value Fair Value Buildings (10-year life) $10,000 $8,000

Equipment (4-year life) 14,000 18,000 Land 5,000 12,000

Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.

In consolidation at December 31, 2020, what net adjustment is necessary for Hogan's Patent account?

No adjustment is necessary.

$8,000.

$6,600.

$4,200.

$5,500.