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Chapter_1_day_1_solutions

Chapter_1_day_1_solutions - 12(10 minutes(Investment...

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12. (10 minutes) (Investment account after two years) Acquisition Price ................................................................................... $60,000 Book Value—assets minus liabilities ($125,000 × 40%) ................ 50,000 Excess Payment ............................................................ $10,000 Value of patent in excess of book value ($15,000 × 40%) ............. 6,000 Goodwill ................................................................................. $4,000 Amortization: Patent ($6,000/6) ............................................................... $1,000 Goodwill ............................................................................ -0- Annual amortization ................................................... $1,000 Acquisition price ................................................................. $60,000 Equity income 2008 ($30,000 × 40%) ................................... 12,000 Dividends—2008 ($10,000 × 40%) ....................................... (4,000) Amortization—2008 (above) .............................................. (1,000 ) Investment in Holister, 12/31/08 ......................................... $67,000 Equity income—2009 ($50,000 × 40%) ................................ 20,000 Dividends—2009 ($15,000 × 40%) ....................................... (6,000) Amortization—2009 (above) .............................................. (1,000 ) Investment in Holister, 12/31/09 .........................................
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