On January 3. 2014, Austin Corp. purchased 25% of the voting common stock of Gai

Question

On January 3. 2014, Austin Corp. purchased 25% of the voting common stock of Gainsvillc Co.. paying $2,000,000. Austin decided to use the equity method to account for this investment. At the time of the investment, total stockholders'equity was $6,000,000. Austin gathered the following information about assets and liabilities: 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. For 2014, what is the total amount of excess amortization for Austin's 25% investment in Gainsville

Explanation / Answer

since all the book values are less than fair market value , so there is no asset whose cost is over the fairmarket value. Thus question of impairment does not arise.

So no excess cost is attributable to Austin's investment so answer is zero.

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