Perth Corporation acquired a 100% interest in Sansone Company for $1,600,000 when Sansone had no liabilities. The book values and fair values of Sansone's assets were: Immediately following the acquisition, equipment will be included on the consolidated balance sheet at
A) $150,000.
B) $200,000.
C) $210,000.
D) $280,000.

Question

Perth Corporation acquired a 100% interest in Sansone Company for $1,600,000 when Sansone had no liabilities. The book values and fair values of Sansone's assets were:  Immediately following the acquisition, equipment will be included on the consolidated balance sheet at
A) $150,000. 
B) $200,000. 
C) $210,000. 
D) $280,000.

Quizplus · Accepted Answer

The equipment has a book value of $150,000 and a fair value of $210,000. In a business combination, the fair value of the assets acquired should be used to record them on the consolidated balance sheet. Therefore, the equipment should be included on the consolidated balance sheet at its fair value of $210,000.

Perth Corporation Acquired a 100% Interest in Sansone Company for $1,600,000