Question
On January 1, 2020, Prestige Corporation acquired 100 percent of the voting stock of Stylene Corporation in exchange for $2,341,500 in cash and securities.
On January 1, 2020, Prestige Corporation acquired 100 percent of the voting stock of Stylene Corporation in exchange for $2,341,500 in cash and securities. On the acquisition date, Stylene had the following balance sheet: Cash Accounts receivable 26,400 102,500 Accounts payable $ 1,854,900 Inventory 216,000 Equipment (net) 2,170,000 Common stock Trademarks 1,016,000 Retained earnings 800,000 876,000 Total assets $ 3,530,900 Total liabilities and equity $ 3,530,900 At the acquisition date, the book values of Stylene's assets and liabilities were generally equivalent to their fair values except for the following assets: Asset Equipment Customer lists Book Value $ 2,170,000 Trademarks 1,016,000 Fair Value $ 2,374,000 176,000 1,068,500 Remaining Useful Life 8 years 4 years indefinite During the next two years, Stylene has the following income and dividends in its own separately prepared financial reports to its parent. 2020 2021 Net Income $ 208,000 244,000 Dividends $ 25,000 45,000
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