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Unformatted text preview: 2. On January 3, 2003, Austin Corp. purchased 25% of the voting common stock of Gainsville Co., paying $2,000,000. Austin decided to use the equity method to account for this investment. At the time of the investment, Gainsville's total stockholders' equity was $6,000,000. Austin gathered the following information about Gainsville's assets and liabilities: Book Value Fair Market Value Buildings (10-year life) $ 400,000 $ 500,000 Equipment (5 Franchises (8--year life) year life) 1,000,000 1,300,000 400,000 For all other assets and liabilities, book value and fair market value were equal. Any excess of cost over fair value was attributed to goodwill, which has not been impaired. 2. For 2004, what is the total amount of excess amortization for Austin's 25% investment in Gainsville? A) $27,500 B) $20,000 C) $30,000 D) $120,000 E) $70,000 4 On July 1, 2002, Big acquires 100% of Little. Both companies have a fiscal year end of 12/31/02. At 12/31/02, how much of the fair market value adjustment associated with inventory should be amortized? A) 100% of the FMV adjustment. B) 50% of the FMV adjustment. C) 50% of 1/3 of the FMV adjustment, assuming the inventory FMV adjustment is amortized over a normal three-year period. D) None of the FMV adjustment is amortized, ever. E) The FASB does not allow inventory to be adjusted to FMV on the consolidated financial statements. 6. In a purchase where control is achieved, how would the land accounts of the parent and the land accounts of the subsidiary be combined?the land accounts of the subsidiary be combined?...
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- Spring '10
- Balance Sheet, Generally Accepted Accounting Principles, fair market value