3-24 - 24. (60 Minutes) (Consolidation worksheet five years...

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24. (60 Minutes) (Consolidation worksheet five years after acquisition with parent using initial value method. Effects of using equity method also included) Acquisition-Date Fair Value Allocation and Annual Amortization: a. Aaron fair value (stock exchanged at fair value) . ...................................... $470,000 Book value of subsidiary . ...................... (360,000 ) Excess fair value over book value . ....... $110,000 Excess assigned to specific accounts based on fair values Annual Excess Life Amortizations Royalty agreements $60,000 6 yrs. $10,000 Trademark 50,000 10 yrs. 5,000 Total $110,000 $15,000 The parent company is apparently applying the initial value method: only dividend income is recognized during the current year and the investment account retains its original $470,000 balance. Therefore, both the subsidiary's change in retained earnings during 2009–2012 as well as the amortization for that period must be brought into the consolidation. Aaron' retained earnings January 1, 2013 . ....................... $490,000 Retained earnings at date of purchase . ............................ (230,000 ) Increase since date of purchase . ....................................... $260,000 Excess amortization expenses ($15,000 x 4 years) . ......... (60,000 ) Conversion to equity method for years prior to 2013
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This note was uploaded on 10/02/2009 for the course ACCT 401 taught by Professor Ross,m during the Spring '08 term at Western Kentucky University.

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3-24 - 24. (60 Minutes) (Consolidation worksheet five years...

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