Question
McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan's total acquisition-date fair value.
McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan's total acquisition-date 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 January 1, 2019, what adjustment is necessary for Hogan's Buildings account?
Multiple Choice
- $2,000 increase.
- $2,000 decrease.
- $1,800 increase.
- $1,800 decrease.
- No change.
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