Question
On January 1, 2016, Acorn company acquired an 80% interest in Bengal companys voting stock for $288,000. On that date Bengal had a $300,000 book
On January 1, 2016, Acorn company acquired an 80% interest in Bengal companys voting stock for $288,000. On that date Bengal had a $300,000 book value and the fair value of the non-controlling interest was $72,000. On January 1, 2017, Bengal acquired 80% of Canaris Company for $104,000 when Canaris had a $100,000 book value and the value of the non-controlling interest was $26,000. In each acquisition, the excess of fair value over book value was assigned to Tradename with a 30-year useful life. These companies reported the following financial information for the years 2016-2018:
| Sales: | 2016 | 2017 | 2018 |
| Acorn | $415,000 | $545,000 | $688,000 |
| Bengal | $200,000 | $280,000 | $400,000 |
| Canaris | NA | $160,000 | $210,000 |
| Expenses: | |||
| Acorn | $310,000 | $420,000 | $510,000 |
| Bengal | $160,000 | $220,000 | $335,000 |
| Canaris | NA | $150,000 | $180,000 |
| Dividends: | |||
| Acorn | $20,000 | $40,000 | $50,000 |
| Bengal | $10,000 | $20,000 | $20,000 |
| Canaris | NA | $2,000 | $10,000 |
Note: Assume that all companies use the equity method of accounting. Note: The solution to part II will include the amortization amounts calculated in Part I.
Required:
- Calculate the annual amortization pertaining to Bengal and Canaris
b. Calculate the value of Acorns investment in Bengal at 12/31/2017.
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