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Unformatted text preview: Q3-1Q3-2Date alignment means adjusting the investment account to reflect the same date as the subsidiary equitya) Simple equity method - equity accounts reflect beginning-of-year balances, yet the investment accounb) Sophisticated equity method - equity accounts reflect beginning-of-year balances, yet the the investmec) Cost method - equity accounts reflect beginning-of-year balances, yet the investment account reflects E3-11Calculation of book value of Subsidiary:Fair value at purchase $1,062,500 Add $200,000 increase in Barker retained earnings $200,000 Deduct amortization of excess (5 years x $10,000 per year) $(50,000)Book value balance $1,212,500 Fair value of Barker Company, December 31, 20X5 (given)Since the adjusted (for acquisition) book value ($1,212,500) exceeds the fair value balance ($1,000,000)Impairment loss:Fair value of Barker Company $1,000,000 Fair value of Barker Company identifiable assets $900,000 Estimated goodwill $100,000 Existing goodwill $262,500 Impairment loss $162,500 a) Subsidiary Income = 30,000Investment = 425,000b) Subsidiary Income = 25,000Investment = 420,000c) Subsidiary Income = 0Investment = 400,000y accounts so their balances reflect the same point in time...
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This note was uploaded on 04/27/2010 for the course ACC 440 taught by Professor Duncan during the Spring '10 term at Ball State.
- Spring '10