Compute the December 31, 2020, consolidated buildings.
A) $1,037,500.
B) $1,007,500.
C) $1,000,000.
D) $1,022,500.
E) $1,012,500.

Question

Quizplus · Accepted Answer

To compute the consolidated buildings, we add up the buildings of the parent company and its subsidiaries as of December 31, 2020. 
Parent company buildings = $700,000
Subsidiary A buildings = $200,000
Subsidiary B buildings = $110,000
Subsidiary C buildings = $35,000
Total consolidated buildings = $700,000 + $200,000 + $110,000 + $35,000 = $1,045,000
However, we need to adjust for the unrealized profit on the intercompany sale of land between the parent company and Subsidiary A. The land was sold for $220,000, but its carrying value on the parent company's books was only $200,000. Therefore, unrealized profit = $220,000 - $200,000 = $20,000. Since the land is still owned by Subsidiary A, we need to reduce Subsidiary A's buildings by the unrealized profit: 
Subsidiary A buildings = $200,000 - $20,000 = $180,000
Thus, the adjusted total consolidated buildings = $700,000 + $180,000 + $110,000 + $35,000 = $1,025,000 
However, we also need to adjust for Subsidiary C's building impairment of $17,500. Since the impairment affected Subsidiary C's buildings, we need to reduce their value: 
Subsidiary C buildings = $35,000 - $17,500 = $17,500 
The final adjusted total consolidated buildings are: 
$700,000 + $180,000 + $110,000 + $17,500 = $1,007,500. 
Therefore, the best choice is B.

Compute the December 31, 2020, Consolidated Buildings