Question
On January 1, 2014, Ridge Road Company acquired 30 percent of the voting shares of Sauk Trail, Inc. for $4,700,000 in cash. Both companies provide
On January 1, 2014, Ridge Road Company acquired 30 percent of the voting shares of Sauk Trail, Inc. for $4,700,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trails board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trails board which gave it the ability to significantly influence Sauk Trails operating and investing activities.
The January 1, 2014, carrying amounts and corresponding fair values for Sauk Trails assets and liabilities follow:
carrying amount | fair value | |
cash and receivables | 210,000 | 210,000 |
computing equipment | 5,900,000 | 7,300,000 |
patented technology | 200,000 | 4,200,000 |
trademark | 250,000 | 2,200,000 |
liabilities | (285,000) | (285,000) |
Also as of January 1, 2014, Sauk Trails computing equipment had a remaining estimated useful life of seven years. The patented technology was estimated to have a three year remaining useful life. The trademarks useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost
|
Carrying Amount | Fair Value | |||||
Cash and receivables | $ | 210,000 | $ | 210,000 | ||
Computing equipment | 5,900,000 | 7,300,000 | ||||
Patented technology | 200,000 | 4,200,000 | ||||
Trademark | 250,000 | 2,200,000 | ||||
Liabilities | (285,000 | ) | (285,000 | ) |
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