Scott Co Acquired 70% of Gregg Co

question 3

Multiple Choice

Scott Co. acquired 70% of Gregg Co. for $525,000 on December 31, 2019 when Gregg's book value was $580,000. The Gregg stock was not actively traded. On the date of acquisition, Gregg had equipment (with a ten-year life) that was undervalued in the financial records by $170,000. One year later, the two companies provided the selected amounts shown below. Additionally, no dividends have been paid. What is the consolidated balance of the Equipment account at December 31, 2020?

• A) $814,000.
• B) $821,000.
• C) $831,000.
• D) $797,000.
• E) $661,000.

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Definitions:

Balance Sheet

A financial statement that shows a company's financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.

Cost Method

An accounting approach used for investments, where the investment is recorded at its original purchase cost without considering changes in its market value.

Equity Method

An accounting technique used to record investments in other companies, where the investment is reported as an asset and the investor's share of the investee's income is reported in the income statement.

Gross Profit

The financial metric resulting from subtracting the cost of goods sold from sales revenue, measuring the efficiency of production.