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When Jolt Co
When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair market value of $100,000.
11. What amount should have been reported for the land on a consolidated balance sheet, assuming the economic unit concept was used?
A) $ 70,000
B) $ 75,000
C) $ 85,000
D) $ 92,500
E) $100,000
12. What amount should have been reported for the land on a consolidated balance sheet, assuming the proportionate consolidation concept was used?
A) $ 70,000
B) $ 75,000
C) $ 85,000
D) $ 92,500
E) $100,000
13. What amount should have been reported for the land on a consolidated balance sheet, assuming the parent company concept was used?
A) $ 70,000
B) $ 75,000
C) $ 85,000
D) $ 92,500
E) $100,000
Expert Solution
The economic unit concept consolidates assets at fair market value. Thus, answer to 11 is E.
The proportionate consolidation concept uses the ownership percentage (75%, in this case) of fair market value. Thus, the answer to 12 is B.
The parent company concept consolidates the asset's book value ($70,000) plus the ownership percentage of the difference between market value and book value (75% of $30,000 or $22,500). So the answer to 13 is D.
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