On January 1, 2021 Design Corporation (DC) purchased 15% of Angel Inc. (AI) for $ 4,000,000. It has been determined that DC does not have significant influence over AI at this time.AI reported net income of $ 1,000,000 for the year ended December 31, 2021. They paid dividends of $ 100,000 in total for the year. The fair value of AI was $ 30,000,000 at December 31, 2021. DC considers AI as part of their active trading portfolio and AI is a public company. On July 1, 2021, DC purchased 30 % of Bake Inc. (BI) for $ 10,000,000. The book value of BI at July 1 was $ 24,000,000. BI has a patent that is not on their balance sheet which has an estimated fair value of $ 4,000,000 on July 1, 2021. The patent had a remaining useful life of 5 years on July 1, 2021. BI also had inventory with a book value of $ 1,000,000 and a fair value of $ 2,000,000 on July 1, 2021. It has been determined that DC does have significant influence over BI beginning July 1, 2021.
On January 1, 2021 Design Corporation (DC) purchased 15% of Angel Inc. (AI) for $ 4,000,000. It has been determined that DC does not have significant influence over AI at this time.AI reported net income of $ 1,000,000 for the year ended December 31, 2021. They paid dividends of $ 100,000 in total for the year. The fair value of AI was $ 30,000,000 at December 31, 2021. DC considers AI as part of their active trading portfolio and AI is a public company. On July 1, 2021, DC purchased 30 % of Bake Inc. (BI) for $ 10,000,000. The book value of BI at July 1 was $ 24,000,000. BI has a patent that is not on their balance sheet which has an estimated fair value of $ 4,000,000 on July 1, 2021. The patent had a remaining useful life of 5 years on July 1, 2021. BI also had inventory with a book value of $ 1,000,000 and a fair value of $ 2,000,000 on July 1, 2021. It has been determined that DC does have significant influence over BI beginning July 1, 2021.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter12: Fainancial Statement Analysis
Section: Chapter Questions
Problem 54CE
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