Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 2, 2018, Company P acquired all of the outstanding voting stock of Company S in exchange for $6,000 in stock. Company P elected

On January 2, 2018, Company P acquired all of the outstanding voting stock of Company S in exchange for $6,000 in stock. Company P elected to exercise control over Company S as a wholly-owned subsidiary with an independent accounting system. Both companies have December 31 year ends. At the acquisition date, Company S has a stockholder's equity of $2,500, which includes Retained Earnings of $1,700. Company P pursued the acquisition, in part, to utilize Company S technology and computer software. These items had fair values that differed from their values on Company S books as follows:

asset book value fair value remaining useful life
patented technol. 140 2240 7 yr
computer software 60 1260 12 yr

At December 31 2020, Company S owes Company P $30. Company S remaining identifiable assets and liabilities had acquisiiton-date book values that closely approximated fair values. Since acquisition, no assets have been impaired. During the next three years, Company S reported the following income and dividends:

yr net income dividend
2018 900 150
2019 940 150
2020 975 150

Prepare the analysis as of acquisition date including unamortized differential at 1/1/18 and through 2020.

Show work.

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

More Books

Students also viewed these Accounting questions

Question

Who will receive the final evaluation?

Answered: 1 week ago