Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 20X9. On the date of acquisition, Princeton held land with a book value of $150,000 and a fair value of $300,000; Sheffield held land with a book value of $500,000 and fair value of $500,000. At what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?

In the consolidated balance sheet, the land of the controlled firm will be at fair value. But, the parent land will be kept at cost as there wasn't a transaction with a third party to validate the market value. Because of this and according to the conservatism principles about assets valuation the aldn must be at cost.

Land:

Princeton 150,000 book value

Sheffiled 500,000 market value

Total 650,000

Tundexi Tundexi · Answer 2 · 2021-11-11T11:44:37+01:00

The value of land to be reported in the consolidated balance sheet is $650,000.

To allow us report the land in the consolidated balance sheet, the value of the land of the controlled firm will be at fair value and the parent land will be kept at cost as there was no transaction with a third party to validate the market value.

The value of Land to be reported in the consolidated balance sheet equals Book value of the parent company + Fair value of the subsidiary company.

The value of land = $150,000 + $500,000

The value of land = $650,000

Therefore, the value of land to be reported in the consolidated balance sheet is $650,000.

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