Prince Company Acquires Duchess, Inc

question 1

Multiple Choice

Prince Company acquires Duchess, Inc. on January 1, 2009. The consideration transferred exceeds the fair value of Duchess' net assets. On that date, Prince has a building with a book value of $1,200,000 and a fair value of $1,500,000. Duchess has a building with a book value of $400,000 and fair value of $500,000. If push-down accounting is used, what amounts in the Building account appear in Duchess' separate balance sheet and in the consolidated balance sheet immediately after acquisition?

• A) $400,000 and $1,600,000.
• B) $500,000 and $1,700,000.
• C) $400,000 and $1,700,000.
• D) $500,000 and $2,000,000.
• E) $500,000 and $1,600,000.

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Definitions:

Assets

Properties or items owned by an organization or a person, which have value and can offer future advantages.

Additional Investment

Additional funds put into a business or project by its owners or investors to support operations, growth, or capital needs.

Owner's Equity

The residual interest in the assets of a company after deducting liabilities, representing the ownership stake of the shareholders.

Drawings

Withdrawals of cash or other assets from a business by the owner for personal use, affecting the equity of the business.