Question
On January 1, 2014, Woody Company acquires 80% of the outstanding common stock of Buzz, for a purchase price of $785,000. It was determined that
On January 1, 2014, Woody Company acquires 80% of the outstanding common stock of Buzz, for a purchase price of $785,000. It was determined that the fair market value of the noncontrolling interest in the subsidiary is $190,000. The book value of the Buzzs stockholders equity on the date of acquisition is $500,000 and its fair market value of identifiable tangible and intangible assets is $900,000. The excess fair market value over book value is allocated $200,000 to equipment with a remaining useful life of 10 years, and $200,000 to a patent with a remaining useful life of 8 years.
Assume that during the year ended December 31, 2014, Buzz reports net income of $210,000 and pays dividends of $21,000. Determine the December 31, 2014 ending balance in Woody Companys equity investment account. (Hint: Do not overlook the effect of amortization AAP assets).
a. $794,500
b. $785,000
c. $860,600
d. $824,600
Answer: d
The answer is D but I need an explanation on why. I keep getting $900,200
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