McGuire Company acquired 90 percent of Hogan Company on January 1, 2017, for $24
ID: 2391225 • Letter: M
Question
McGuire Company acquired 90 percent of Hogan Company on January 1, 2017, for $243,000 cash. This amount is reflective of 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) Equipment (4-year life Land S10,000 14.000 5,000 $ 8,000 18,000 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 January 1, 2017, what adjustment is necessary for Hogan's Equipment account? O $3,600 increase. O $4,000 increase. O $3,600 decrease. O $4000 decrease. O No adjustment is necessary.Explanation / Answer
$4,000 increase
While consolidation, we will revalue the Equipment upward by $4,000.
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Book Value of Equipment $ 14,000 Fair Value of Equipment $ 18,000 Excess Fair Value Over book Value $ 4,000