On January 1, 2013, Green Corporation purchased 36% of the outstanding voting co
ID: 2423117 • Letter: O
Question
On January 1, 2013, Green Corporation purchased 36% of the outstanding voting common stock of Gold Company for $300,400. The book value of the acquired shares was $275,550. The excess of cost over book value is attributable to an intangible asset on Gold's books that was undervalued and had a remaining useful life of five years. For the year ended December 31, 2013, Gold reported net income of $125,750 and paid cash dividends of $25,350. What is the carrying value of Green's investment in Gold at December 31, 2013?
$300,400.
$291,274.
$336,544.
$331,574.
Explanation / Answer
Carrying value of investment
=Initial investment + share of net income reported by Gold - share of dividends from gold - Amortization of intangible asset.
= $300,400 + (125,750*36%) - (25,350*36%) - {(300,400 - 275,550) / 5}
= $300,400 + 45270 - 9126 - 4970
= $331,574
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