Question
Pearl acquires 90% of the voting stock of Spruce on January 1, 2020 for $5,000. The fair value of the noncontrolling interest is $550. Spruce's
Pearl acquires 90% of the voting stock of Spruce on January 1, 2020 for $5,000. The fair value of the noncontrolling interest is $550. Spruce's equity is reported at $4,800 at the date of acquisition. Its net assets are reported at amounts approximating fair value, but it has previously unreported identifiable intangible assets (5-year life, straight-line), valued at $1,000. Pearl uses the complete equity method to account for its investment. Spruce reports net income of $300 for 2020. At what value does Pearl record its investment in Spruce at January 1, 2020?
A. | $5,250 | |
B. | $4,900 | |
C. | $5,100 | |
D. | $5,000 |
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