3. McGuire Company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan?s total fair value. Hogan?s stockholders? equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan?s net assets revealed the following: Book Value Fair Value Buildings (10- year life) $ 10,000 $ 8,000 Equipment (4-year life) 14,000 18,000 Land 5,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. In consolidation at December 31, 2011, what total adjustment is necessary for Hogan?s Equipment account? (Hint: The total adjustment is the total effect of Entries [A] and [E] to equipment).

McGuire Company acquired 90 percent of Hogan Company on January 1, 2010, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: Buildings (10- year life) Equipment (4-year life) Land Book Value $ 10,000 14,000 5,000 Fair Value $ 8,000 18,000 12,000 Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. In consolidation at December 31, 2011, what total adjustment is necessary for Hogan's Equipment account? (Hint: The total adjustment is the total effect of Entries [A] and [E] to equipment). Solution : Adjustment is necessary for Hogan's Equipment account = Fair Value of Equipment (18000) Book Value of Equipment (14,000) Adjustment is necessary for Hogan's Equipment account $4,000.0 Decrease