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Choco Co. acquired 90% of Allie Co. (Allie has total of 100,000 shares outstanding and Choco acquired 90,000 shares) for $810,000 ($9/share) on December 31, 2018. The market value of Allie's stock was $9/share. Choco uses equity method to report its investment in Allie.
12/31/2018
Choco Co.
Allie Co.
BV
FV
Current assets
$1,368,000
$238,000
Equipment [8 years]
164,000
280,000
360,000
Buildinqs 120 years'
274 000
210 000
270 000
Liabilities $(546,000)
$(168,000)
Common stock
(300,000)
(150,000)
Additional paid in capital
(460 000)
(350 000)
Retained earnings [12/31/18]
(500,000)
(60,000)
*note: numbers in this table in 1) refer to credit balance.
During 2019, Allie earned net income of $180,000 and paid dividends of $22,000.
Question a) All excess payment that Choco paid to purchase Allie will be recorded as a patent (NOT goodwill) with useful life of 25 years. Calculate patent and allocated calculated patent between controlling and noncontrolling interest (NCI) on 12/31/2018 (acquisition date)
Question b) Calculate annual amortization excess FV>BV of equipment, building, and patent?
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