On January 1, 2014, Ridge Road Company acquired 20 percent of the voting shares of Sauk Trail, Inc. for $2,900,000in cash. Both companies provide commercial internet support services but serve markets in different industries. Ridge Road made the investment to gain assess to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtain several seats on Sauk Trail's board which gave it the ability to significantly influence Sauk Trail's operating and investing activities.

The January 1, 2014 carrying amounts and corresponding fair value for Sauk Trail's assets and liabilities follow:

Carrying Amount Fair Value

Cash and receivables$ 120,000$ 120,000

Computing equipment 5,090,0005,860,000

Patented technology 110,000 4,020,000

Trademark 160,000 2,020,000

Liabilities ( 195,000) (195,000)

Also as of January 1, 2014, Sauk trail's computing equipment and a remaining estimated useful life of sevenyears. The patented technology was estimated to have four years remaining useful life. The trademark's useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost.

During the next two years, Sauk trail's reported the following net income and dividends:

Dividends

Net Income Declared

2014 $ 1,820,000$ 160,000

2015 2,005,000 170,000

a. How much of Ridge Road's $2,900,000 payments for Sauk Trail's attributable to goodwill?

Goodwill

b. What should Ridge Road report for equity in Sauk trail's earnings on its income statements for 2014 and 2015?

2014 2015

Equity in Sauk trail's earnings

c. What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2014 and 2015?

20142015

investment inSauk trail