Question
A company acquires 100% of the common stock of another company on January 1, 20X1. The difference between the amount paid and the book value
A company acquires 100% of the common stock of another company on January 1, 20X1. The difference between the amount paid and the book value of the subsidiary's net assets is $105,000. The differential includes excess value related to: Equipment of $75,000, Inventory of $8,000, and Goodwill of $22,000. The equipment had a remaining economic life of 15 years from the date of acquisition (resulting in excess depreciation of $5,000 per year). The entire inventory acquired was sold in the year of acquisition. Management also determined that a $5,000 goodwill impairment loss should be recognized in the consolidated income statement. Calculate the amount of differential to be amortized in the year of acquisition.
$18,000
$22,000
$15,000
$8,000
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