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Basic Question 4 of 20
Richardson, Inc. purchased 80 percent of Frankfort Enterprises at market value. At the acquisition date, Richardson's equipment had a market value of $380,000 and a book value of $250,000, while Frankfort's equipment had a market value of $82,000 and a book value of $60,000. What is the equipment account purchase differential included on the acquisition date consolidated balance sheet under the acquisition method?
B. $17,600.
C. $130,000.
A. $22,000.
B. $17,600.
C. $130,000.
User Contributed Comments 5
| User | Comment |
|---|---|
| NufaNka | Frankfort's equipment market value 82k, book value 60k. 82k - 60k = 22k. |
| danlan2 | In consolidated balance sheet, 80 percent is not used. I think 20 percent is reported as minority interest. |
| ssradja | good point |
| vi2009 | Good question! Refer to p37-38 (e.g. 10) very similar. Note that IFRS & U.S.GAAP has different approaches to handling less than 100% acquisitions such as this case. IFRS: 100% of fairvalue. So for this question, the given answer seem to refer to IFRS. Hence the entire 100% fairvalue - 100% book value to find the difference. U.S.GAAP: 80% of fairvalue + 20% of the book value |
| davidt876 | vi's out here saving lives |
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Learning Outcome Statements
describe the classification, measurement, and disclosure under International Financial Reporting Standards (IFRS) for 1) investments in financial assets, 2) investments in associates, 3) joint ventures, 4) business combinations, and 5) special purpose and variable interest entities;
distinguish between IFRS and US GAAP in their classification, measurement, and disclosure of investments in financial assets, investments in associates, joint ventures, business combinations, and special purpose and variable interest entities;
analyze how different methods used to account for intercorporate investments affect financial statements and ratios.
CFA® 2025 Level II Curriculum, Volume 2, Module 10.