Essay
On January 1, 2014, Persona Company acquired 80% of Sule Tooling for $332,000. At that time, Sule reported their Common stock at $150,000, Additional paid in capital at $45,000, and Retained earnings at $105,000. Sule also had equipment on their books that had a remaining life of 10 years and were undervalued on the books by $40,000, but any additional fair value/book value differential is assumed to be goodwill. During the next three years, Sule reported the following:
Required: Calculate the following.
a. How much excess depreciation or amortization would be recognized in the consolidated financial statements in each of these three years?
b. How much goodwill would be recognized on the balance sheet at the date of acquisition, and at the end of each year listed?
c. How much investment income would be reported by Persona under the equity method for each of the three years?
d. What would be the balance in the Investment in Sule account at January 1, 2014, and at the end of each of the three years listed?
Correct Answer:
Verified
Correct Answer:
Verified
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