On 12/31/Year 1 Passey Co. acquired a 100% interest inSolomon Co. by exchanging 10000 shares of its common stock for100000 shares of Solomons common stock. The fair market value ofPasseys common stock on December 31 Year 1 was $9 per share andthe fair value of Solomons was $3.50 per share.Additional information as of December 31 Year 1 is as follows:
Solomon Co.
Book Values Fair Values
Current assets $115000 $115000
Plant assets 200000 255000
Liabilities 10000 10000
Passey Co.Plant assets$1700000 $1800000
Passeys consolidated financial statements as of December 31 Year1 would report plant assets at:__________.
i. $1700000
ii. $1800000
iii. $1955000
iv. $2055000

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anthougo anthougo · Answer 1 · 2021-12-22T15:32:58+01:00

The consolidated financial statements of Passey Co. as of December 31, Year 1 would report plant assets at iii. $1,955,000.

Data and Calculations:

Passey Co.s shareholding in Solomon Co. = 100%

The fair value of Solomon's = $3.50

The fair value of Passey's = $9

Solomon Co.

Book Values Fair Values

Current assets $115,000 $115,000

Plant assets 200,000 255,000

Liabilities 10,000 10,000

Passey Co.

Plant assets $1,700,000 $1,800,000

Consolidated Plant Assets:

Passey Co. Solomon Co. Consolidated

Number of shares exchanged 10,000 100,000

Plant assets $1,700,000 $255,000 $1,955,000

Thus, the consolidated financial statements of Passsey Co. as of December 31, Year 1 would report plant assets at iii. $1,955,000.

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