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gogolik [260]
2 years ago
6

On January 1, 2018, Green Corporation purchased 30% of the outstanding voting common stock of Gold Company for $300,850. The boo

k value of the acquired shares was $275,400. 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, 2018, Gold reported net income of $125,600 and paid cash dividends of $25,050. What is the carrying value of Green's investment in Gold at December 31, 2018?
Business
1 answer:
tatuchka [14]2 years ago
7 0

Answer:

Investment on Gold Company 305,565

Goodwill                                      20,360

Carrying value                          325,925

Explanation:

<em>Because our current control, we have to use the equity valuation</em>

<em>the net income increased our investment and the cash dividends decreased.</em>

beginning book value 275,400

+ 30% net income

30% of 125,600 = 37,680

-30% cash dividends

30% of 25,050 = (7,515)

ending I<u>nvestment on Gold Company 305,565</u>

<u />

<em>The goodwill will be amortized over 5 years using straight-line method</em>

<u>Goodwill</u>

300,850 - 275,400 = 25,450

life 5 years

25,450/5 = 5,090

amortization                (5,090)

<u>Total                            20,360</u>

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