Question

On January 1, 20X6, Plus Corporation acquired 90 percent of Side Corporation for $180,000 cash. Side reported net income of $30,000 and dividends of $10,000 for 20X6, 20X7, and 20X8. On January 1, 20X6, Side reported common stock outstanding of $100,000 and retained earnings of $60,000, and the fair value of the noncontrolling interest was $20,000. It held land with a book value of $30,000 and a market value of $35,000 and equipment with a book value of $50,000 and a market value of $60,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of five years. All depreciable assets held by Side at the date of acquisition had a remaining economic life of five years. Plus uses the equity method in accounting for its investment in Side.
29) Based on the preceding information, the increase in the fair value of patents held by Side is:
A) $20,000
B) $25,000
C) $15,000
D) $5,000
30) Based on the preceding information, what balance would Plus report as its investment in Side at January 1, 20X8?
A) $230,400
B) $180,000
C) $234,000
D) $203,400
31) Based on the preceding information, what balance would Plus report as its investment in Side at January 1, 20X9?
A) $251,100
B) $224,100
C) $215,100
D) $234,000

Answer 1

Answer:

29) B) $25,000

30) D) $203400

31) C) $215,100

Explanation:

Fair value of parents held by side will be $25,000.