On January 1, 2014, Brendan, Inc., reports net assets of $849,650 although equip

Question

On January 1, 2014, Brendan, Inc., reports net assets of $849,650 although equipment (with a four-year life) having a book value of $464,000 is worth $544,750 and an unrecorded patent is valued at $46,900. Hope Corporation pays $781,840 on that date for an 80 percent ownership in Brendan. If the patent is to be written off over a 10-year period, at what amount should it be reported on consolidated statements at December 31, 2015?

$30,016.

$33,768.

$37,520.

$42,210.

On January 1, 2014, Brendan, Inc., reports net assets of $849,650 although equipment (with a four-year life) having a book value of $464,000 is worth $544,750 and an unrecorded patent is valued at $46,900. Hope Corporation pays $781,840 on that date for an 80 percent ownership in Brendan. If the patent is to be written off over a 10-year period, at what amount should it be reported on consolidated statements at December 31, 2015?

Explanation / Answer

Value of the Patent on January 1, 2014 = $46,900

Expected life = 10 years

Amoritzation for 2014 = $46,900 / 10 = $4,690

Carrying value of patent in consolidated statements at December 31, 2015 =

$46,900 - $4,690

= $42,210

Therefore, Option D $42,210 is correct.

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