Question
On 1 January 2018, Gamma, Inc. paid $225,000 for a 20 percent interest in Subsidiary Corporations common stock. This investee had assets with a book
On 1 January 2018, Gamma, Inc. paid $225,000 for a 20 percent interest in Subsidiary Corporations common stock. This investee had assets with a book value of $890,000 and liabilities of $650,000. A patent held by subsidiary having a $55,000 book value was actually worth $200,000. This patent had a 5-year remaining life. Any further excess cost associated with this acquisition was attributed to Goodwill. During 2018, subsidiary earned income of $24,000 and paid dividends of $4,800. In 2019, it had income of $65,000 and paid dividends of $13,000.
a) Calculate the excess of Cost over BV acquired.
b) Calculate the amount attributable to Goodwill.
c) Calculate the amount of excess amortization expense.
d) What balance should appear in the Investment in Subsidiary account as of 31 December 2018?
e) What balance should appear in the Investment in Subsidiary account as of 31 December 2019?
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