1) On January 1, 2018, Jay Company acquired all the outstanding ownership shares of Zee Company. In assessing Zees acquisition-date fair values, Jay concluded that the carrying value of Zees long-term debt (8-year remaining life) was less than its fair value by $27,200. At December 31, 2018, Zee Companys accounts show interest expense of $13,950 and long-term debt of $450,000. What amounts of interest expense and long-term debt should appear on the December 31, 2018, consolidated financial statements of Jay and its subsidiary Zee?

	Interest expense	Long-term debt
a.	$17,350	$477,200
b.	$17,350	$473,800
c.	$10,550	$477,200
d.	$10,550	$473,800

2) Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paars equipment (10-year life) has a book value of $307,500 but a fair value of $436,500. Kimmel has equipment (10-year life) with a book value of $271,000 but a fair value of $409,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2017, Paar has equipment with a book value of $215,250 but a fair value of $370,950. Kimmel has equipment with a book value of $189,700 but a fair value of $355,600. What is the consolidated balance for the Equipment account as of December 31, 2017?

(A) $501,550.

(B) $404,950.

(C) $542,950.

(D) $726,550.

3) Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2015. On that date, Paars equipment (10-year remaining life) has a book value of $420,000 but a fair value of $520,000. Kimmel has equipment (10-year remaining life) with a book value of $272,000 but a fair value of $400,000. Paar uses the equity method to record its investment in Kimmel. On December 31, 2017, Paar has equipment with a book value of $294,000 but a fair value of $445,200. Kimmel has equipment with a book value of $190,400 but a fair value of $357,000. The consolidated balance for the Equipment account as of December 31, 2017 is $574,000.

What would be the impact on consolidated balance for the Equipment account as of December 31, 2017 if the parent had applied the initial value method rather than the equity method?

(A) No effect: The method the parent uses is for internal reporting purposes only and has no impact on consolidated totals.

(B) The consolidated Equipment account would have a higher reported balance.

(C) The consolidated Equipment account would have a lower reported balance.

(D) The balance in the consolidated Equipment account cannot be determined for the initial value method using the information given.