On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows: During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the consolidated total for equipment (net)at December 31, 2021?
A)$952,000.
B)$1,058,400.
C)$1,069,600.
D)$1,064,000.
E)$1,066,800.

Question

On January 1, 2021, Pride, Inc. acquired 80% of the outstanding voting common stock of Strong Corp. for $364,000. There is no active market for Strong's stock. Of this payment, $28,000 was allocated to equipment (with a five-year life)that had been undervalued on Strong's books by $35,000. Any remaining excess was attributable to goodwill, which has not been impaired.As of December 31, 2021, before preparing the consolidated worksheet, the financial statements appeared as follows:  During 2021, Pride bought inventory for $112,000 and sold it to Strong for $140,000. Only half of the inventory purchase price had been remitted to Pride by Strong at year-end. As of December 31, 2021, 60% of these goods remained in the company's possession.What is the consolidated total for equipment (net)at December 31, 2021?
A)$952,000. 
B)$1,058,400. 
C)$1,069,600. 
D)$1,064,000. 
E)$1,066,800.

Quizplus · Accepted Answer

First, we need to calculate the equipment (net) balance attributed to Pride and Strong's purchase in 2021:

Pride's original purchase price allocation for equipment: $28,000 
Add Strong's undervaluation of equipment: $35,000 
Total equipment balance attributed to Pride: $63,000

80% of equipment balance attributed to Pride: $50,400

Equipment balance attributed to Strong: $288,000

Depreciation on Strong's equipment during 2021 (assuming straight-line method and no salvage value): 
($288,000 - $35,000) / 5 = $50,600

Consolidated equipment (net) balance: 
$50,400 + ($288,000 - $50,600) = $287,800

Therefore, the consolidated total for equipment (net)at December 31, 2021 is $1,064,000.