If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary's Building in a consolidation at December 31, 2019, assuming the book value of the building at that date is still $200,000?
A) $200,000.
B) $285,000.
C) $290,000.
D) $295,000.
E) $300,000.

Question

Quizplus · Accepted Answer

Since Watkins pays $450,000 in cash for Glen, the excess price paid over the book value of the subsidiary’s net assets will be recorded as goodwill. 
Goodwill = Price Paid - Fair Value of Net Assets = $450,000 - ($200,000) = $250,000 
The building will still be recorded at its book value of $200,000 in the consolidation. 
Therefore, the amount that would be represented as the subsidiary’s building in the consolidation is: 
$200,000 + ($250,000/total fair value of net assets) = $285,000

If Watkins Pays $450,000 in Cash for Glen, What Amount