Question

QUESTION 22 On January 3, 2020, Bob Corp. purchased 25% of the voting common stock of Jeremy Co. paying $2,400. Bob decided to use the equity method to account for this investment. At the time of the investment Jeremy's total stockholders' equity was $8,000. Bob gathered the following information about Jeremy's assets and liabilities: Buildings (10 year life) Equipment (6-year life) Franchises (8-year life) Book Value $ 400 1.000 $ 0 Fair Value 5 500 1,300 $ 400 For all other assets and liabilities, book value and fair value were equal. Any excess of cost over fair value was attributed to goodwill, which has not been impaired. For 2020, what is the total amount of excess amortization for Bob's 25% investment in Jeremy? 530 5120 570 520 $27.5

Answer 1

$20.

с D E F Book Value Fair Value $400 $500 $1,000 $1,300 SO $400 106 107 108 Buildings (10 year life) 109 Equipment ( 5 year life) 110 Franchises (8 year life) 111 Total 112 Total stockholders' equity 113 Total fair market value 114 115 116 Amount paid for acquiring 117 Fair market value 118 Goodwill 119 Total amount of excess amortization Goodwill $100 $300 $400 $800 $8,000 $8,800 $2,400 $2,200 $200 $20

E F Fair Value 500 1300 400 с D 106 107 Book Value 108 Buildings (10 year life) 400 109 Equipment ( 5 year life) 1000 110 Franchises (8 year life) 0 111 Total 112 Total stockholders' equity 113 Total fair market value 114 115 116 Amount paid for acquiring 2400 117 Fair market value =8800*25% 118 Goodwill =D116-D117 119 Total amount of excess amortization =D118*1/10 Goodwill =E108-D108 =E109-D109 =E110-D110 =F108+F109+F110 8000 =F111+F112