on april 1,2018, big ben company acquired 30% of the shares of Little Tick, Inc. Big...
on april 1,2018, big ben company acquired 30% of the shares of Little Tick, Inc. Big Ben paid $100,000 for the investment, which is $40,000 more than 30% of the book value of Little Tick's identifiable net assets. Big Ben attributed $15,000 of 40,000 difference to inventory that will be sold in the remainder of 2018, and the rest to goodwill. Little Tick recognized a total of $20,000 of net income for 2018, and paid total dividends for year $10,000, These dividends were issued quarterly. Big Ben's investment in Little Tick will affect Big Ben's 2018 net income
Homework Answers
Big Ben attributed $15,000 to inventory from the difference of $40,000. It will receive its share 30% of net income for 2018 from Little Tick which is for the 9 months period.
Affect on Net income = Net income of Little tick * Share of Big
Ben * (9/12) - Amount attributed to inventory
= $20,000 * 30% * 9/12 - $15,000
= $4,500 - $15,000
= $ -10,500 i.e. loss
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on april 1,2018, big ben company acquired 30% of the shares of
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