Included in the identifiable net assets of Sapphire Company on the date of its b
ID: 2385549 • Letter: I
Question
Included in the identifiable net assets of Sapphire Company on the date of its business combination with Palumbo Corporation was a building with an appraised value of $900,000 and a carrying amount of $600,000. If the Palumbo-Sapphire business combination met the requirements of a "tax-free corporate reorganization" for income tax purposes and the income tax rate was 40%, the current fair value of Sapphire's building for inclusion in the consolidated financial statements of Palumbo Corporation and subsidiary is:$600,000
$720,000
$780,000
$900,000
Some other amount
Explanation / Answer
fair value = 600000+(900000-600000)*0.4 = 720000 dollars