Asked by
Raven Brooks
on Nov 30, 2024
Verified
P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares, which it accounts for using the equity method. On December 31, 2018, the shareholder's equity section of Q Corp. was comprised of $15,000 in common shares and retained earnings with the amount of $450,000. Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year ended December 31, 2019.
There have been no goodwill impairment losses since acquisition.
On January 1, 2020, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January 1, 2019, the investment account had a balance of $420,000. The acquisition differential was to be allocated as follows:
60% to patents (6 year remaining life) .
30% to equipment (9 year remaining life) .
How much of the acquisition differential was allocated to equipment on January 1, 2019?
A) Nil
B) $6,000
C) $18,000
D) $36,000
Acquisition Differential
The difference between the purchase price of an acquired company and the book value of its net assets.
- Allocate the excess cost of acquisition to distinguished assets and liabilities and acknowledge the methodology behind its amortization.
Verified Answer
TJ
Learning Objectives
- Allocate the excess cost of acquisition to distinguished assets and liabilities and acknowledge the methodology behind its amortization.