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ACCT 455 QUIZ2 F2009 SOLUTION

ACCT 455 QUIZ2 F2009 SOLUTION - Bolivar Co for $1,200,000...

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ACCT 455/555 FALL 2009 QUIZ 2A SOLUTION On January 1, 2008, Spark Corp. acquired a 40% interest in Cranston Inc. for $250,000. This acquisition gave Spark the ability to exercise significant influence over the investee. On that date, Cranston's balance sheet disclosed net assets of $430,000. During 2008, Cranston reported net income of $100,000 and paid cash dividends of $30,000. Any excess cost over fair value is attributable to an unamortized trademark with a 20 year remaining life. Required: Prepare a schedule to show the balance Spark should report as its Investment in Cranston Inc. at December 31, 2008. PURCHASE PRICE $250,000 BOOK VALUE .40 X 430,000 172,000 TRADEMARK $ 78,000 / 20 = $3,900 EXTRA EXP. INVESTMENT IN C: PURCHASE PRICE 250,000 .4 X NI 40,000 EXTRA EXPENSES (3,900) ,4 X DIV (12,000) $274,100
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ACCT 455/555 FALL 2009 QUIZ 2B SOLUTION On January 3, 2008, Jenkins Corp. acquired 40% of the outstanding common stock of
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Unformatted text preview: Bolivar Co. for $1,200,000. This acquisition gave Jenkins the ability to exercise significant influence over the investee. The book value of the acquired shares was $950,000. Any excess cost over the underlying book value was assigned to a patent that was undervalued on Bolivar's balance sheet. This patent has a remaining useful life of ten years. For the year ended December 31, 2008, Bolivar reported net income of $312,000 and paid cash dividends of $96,000. Required: Prepare a schedule to show the balance Jenkins a should report as its Investment in Bolivar Co. at December 31, 2008. PURCHASE PRICE $1,200,000 BOOK VALUE GIVEN 950,000 PATENT 250,000 / 10 = 25,000 EXTRA EXP. INVESTMENT IN C: PURCHASE PRICE 1,200,000 .4 X NI 124,800 EXTRA EXPENSES ( 25,000) ,4 X DIV (38,400) 1,261,400...
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