Question

On January 1, 20X5, Playa Company acquires 90 percent ownership in Seaside Corporation for $180,000. The fair value of the noncontrolling interest at that time is determined to be $20,000. Seaside reports net assets with a book value of $200,000 and fair value of $200,000. Playa Company reports net assets with a book value of $480,000 and a fair value of $525,000 at that time, excluding its investment in Seaside. What will be the amount of consolidated net assets that would be reported immediately after the combination?

Answer 1

Answer:

$680,000

Explanation:

Since Playa Company owns 90% of Seaside Corporation, it is considered Seaside's parent company and it must include all of Seaside's assets when it presents its consolidated balance sheet.

Total net assets reported = $480,000 (Playa's net assets at book value) + $200,000 (Seaside's net assets) = $680,000