Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2017 Ridge Road Company acquired 30 percent of the voting shares of Sauk Trail, Inc., for $4,400,000 in cash. Both companies provide

image text in transcribed
image text in transcribed
On January 1, 2017 Ridge Road Company acquired 30 percent of the voting shares of Sauk Trail, Inc., for $4,400,000 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 Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained 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, 2017, carrying amounts and corresponding fair values for Sauk Traill's assets and liabilities follow: Carrying Amount Fair Value Cash and receivables $ 195,000 $ 195,000 Computing equipment 5,765,000 7,060,000 Patented technology 185,000 4,170,000 Trademark 235,000 2,170,000 Liabilities (270,000) (270,000) Also as of January 1, 2017, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a three-year 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 reported the following net income and dividends: Dividends Declared $ 235,000 Net Income $1,970,000 2017 Check During the next two years, Sauk Trail reported the following net income and dividends: 2017 2018 Net Income $ 1,970,000 2,155,000 Dividends Declared $ 235,000 245,000 a. How much of Ridge Road's $4,400,000 payment for Sauk Trail is attributable to goodwill? b. What amount should Ridge Road report for its equity in Sauk Trail's earnings on its income statements for 2017 and 2018? c. What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2017 and 2018? Complete this question by entering your answers in the tabs below. Req A Req B and C How much of Ridge Road's $4,400,000 payment for Sauk Trail is attributable to goodwill? Goodwill

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Life Audit Workbook Meant For More

Authors: Agnese Iskrova

1st Edition

1716274958, 978-1716274954

More Books

Students also viewed these Accounting questions