Question
On January 1, 2020, 123 Corp. acquired all of the outstanding stock of ABC, Inc. by issuing 100,000 shares of 123 common stock with a
On January 1, 2020, 123 Corp. acquired all of the outstanding stock of ABC, Inc. by issuing 100,000 shares of 123 common stock with a $1 par value and $60 market value per share. ABC. will continue to operate as a separate legal entity with independent accounting systems. At the acquisition date, ABC, Inc. had equity balances of $300,000 in common stock, $500,000 in additional-paid-in capital, and $1,500,000 in retained earnings. 123 uses the equity method to account for their investment. As of the date of acquisition, all of ABC, Inc.s assets and liabilities equaled fair values with the exception of the following:
Account | Book Value | Fair Value |
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Equipment | 1,000,000 | 3,100,000 | 5 |
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Patents | 100,000 | 1,100,000 | 10 |
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During 2020 and 2021 ABC Inc. reported the following totals for net income and dividend declarations:
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