In January 20X0, Farley Corporation acquired 20 percent of Davis Companys outstanding common stock for $800,000. This
Question:
In January 20X0, Farley Corporation acquired 20 percent of Davis Company’s outstanding common stock for $800,000. This investment gave Farley the ability to exercise significant influence over Davis. The book value of the acquired shares was $600,000. The excess of cost over book value was attributed to an identifiable intangible asset, which was undervalued on Davis’s balance sheet and had a remaining economic life of 10 years. For the year ended December 31, 20X0, Davis reported net income of $180,000 and paid cash dividends of $40,000 on its common stock. What is the proper carrying value of Farley’s investment in Davis on December 31, 20X0?
a. $772,000
b. $780,000
c. $800,000
d. $808,000
Step by Step Answer:
Advanced Financial Accounting
ISBN: 9781260165111
12th Edition
Authors: Theodore Christensen, David Cottrell, Cassy Budd