On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash
Question:
On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash consideration. The remaining 20 percent of Suarez had an acquisition-date fair value of $65,000. On January 1, Suarez possessed equipment (5-year remaining life) that was undervalued on its books by $25,000. Suarez also had developed several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded on Suarez’s financial records, were estimated to have a 20-year future life. As of December 31, the financial statements appeared as follows:
During the year, Jarel bought inventory for $80,000 and sold it to Suarez for $100,000. Of these goods, Suarez still owns 60 percent on December 31.
Fundamentals of Advanced Accounting
ISBN: 978-0077862237
6th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik