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Problem 5 - 1 3 LO 1 , ( 9 ) , 1 9 3 On July 1 , Year 5 , Big purchased 8

Problem 5-13
LO1,(9),193
On July 1, Year 5, Big purchased 80% of the outstanding common shares of Little for $122,080, On that datc, Little's equipment had a fair value that was $21,600 less than carrying amount. The equipment had accumulated depreciation of $20,000 and an estimated remaining useful life of 8 years. Also, at the date of acquisition, Litule had an exclusive contract with the provincial government to perform periodic environmental audits of selected mining companies for the next five years. An independent business valuator indicated that a third party might pay up to $50,000 to take over this contract. All other assets and liabilities had carrying amounts equal to fair values. On June 30, Year 6, goodwill had a recoverable amount of $20,000.
On June 30, Year 6, the following finaneial statements were prepared. Big uses the cost method to account for its investment.
NCOMESTATEMTS
\table[[,atis,Limk],[Sales,5270,000,$ 162.000],[,10,800,],[,280,800,162,000],[Cost of sales,140,100,94,380],[Expenses (misc.),31.050,28.200],[171.180,122.580],[Net insome,S 109.620,s 39.420]]
RETAINED EARNTNGS STATEMENTS
Ralance, Jaly I
s 459.000
S 32,400
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