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10 August, 16:27

Velway acquired Joker Inc. on January 1, 2018. The parent paid more than the fair value of the subsidiary's net assets. On that date, Velway had equipment with a book value of $500,000 and a fair value of $640,000. Joker had equipment with a book value of $400,000 and a fair value of $470,000. Joker decided to use push-down accounting. Immediately after the acquisition, what Equipment amount would appear on Joker's separate balance sheet and on Velway's consolidated balance sheet, respectively? $400,000 and $970,000 $400,000 and $900,000 $470,000 and $970,000 $470,000 and $900,000

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  1. 10 August, 16:38
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    On Joker's separate balance sheet equipment amount would appear

    = $470,000

    On Velway consolidated balance sheet equipment amount would appear

    = $970,000

    Explanation:

    Given:

    Velway Book value of the equipment = $500,000

    Velway Fair value of the equipment = $640,000

    Joker book value of the equipment = $400,000

    Joker Fair value of the equipment = $470,000

    Now,

    On Joker's separate balance sheet equipment amount would appear

    = Fair value of equipment

    = $470,000

    And,

    On Velway consolidated balance sheet equipment amount would appear as

    = Book value of equipment of Velway + Fair value of equipment of joker

    = $500,000 + $470,000

    = $970,000
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