Crawford Corporation acquires Nashville, Inc. The parent pays more for it than t
ID: 2422353 • Letter: C
Question
Crawford Corporation acquires Nashville, Inc. The parent pays more for it than the fair value of the subsidiary’s net assets. On the acquisition date, Crawford has equipment with a book value of $434,000 and a fair value of $630,000. Nashville has equipment with a book value of $305,500 and a fair value of $376,000. Nashville is going to use push-down accounting. Immediately after the acquisition, what amounts in the Equipment account appear on Nashville’s separate balance sheet and on the consolidated balance sheet
Explanation / Answer
Subsidary Nashville will show the asset at fair value= $ 376000 Ans
Push-Down Accounting refers to the practice of revaluing the assets and liabilities of a purchased subsidiary directly on the books of that subsidiary at the date of acquisition and Nashville is using push down accounting
In the consolidation Balance Sheet= Crawford equipment at book value+Nashville equipment at fair vale
$434000+$376000=$810000 Ans