Dodge, Incorporated acquires 15% of Gates Corporation on January 1, 20x1, for $100,000 when the book...

Transcribed Image Text:

Dodge, Incorporated acquires 15% of Gates Corporation on January 1, 20x1, for $100,000 when the book value of Gates was $600,000. On 12/31/20x1, Gates was appraised to be $680,000 fair market value. On January 1, 20x2, Dodge purchased an additional 25% of Gates for $200,000 to achieve significant influence over Gates. At the time of Dodge's purchase of additional 25%, there were one identifiable equipment and one bonds payable (i.e., liability) reported to have different book values from their fair market values. Equipment (useful life = 5 years) Bonds Payable (useful life = 3 years) Year 20x1 20x2 20x3 Net Income Gate also reported the following information and Gate did not issue any new shares or buy back any shares of stocks over the three years. $100,000 $80,000 $120,000 Amount Dividends $20,000 $20,000 $20,000 Under-valued Over-valued $10,000 $3,000 For 20x1, what is total effect on income statement for Dodge's purchase of 15% of Gates? When Dodge purchased an additional 25% of Gate's interests, what is the amount of goodwill can be recognized? Select one: a. $17,000. b. $0 c. $15,400. d. $24,800. Dodge, Incorporated acquires 15% of Gates Corporation on January 1, 20x1, for $100,000 when the book value of Gates was $600,000. On 12/31/20x1, Gates was appraised to be $680,000 fair market value. On January 1, 20x2, Dodge purchased an additional 25% of Gates for $200,000 to achieve significant influence over Gates. At the time of Dodge's purchase of additional 25%, there were one identifiable equipment and one bonds payable (i.e., liability) reported to have different book values from their fair market values. Equipment (useful life = 5 years) Bonds Payable (useful life = 3 years) Year 20x1 20x2 20x3 Net Income Gate also reported the following information and Gate did not issue any new shares or buy back any shares of stocks over the three years. $100,000 $80,000 $120,000 Amount Dividends $20,000 $20,000 $20,000 Under-valued Over-valued $10,000 $3,000 For 20x1, what is total effect on income statement for Dodge's purchase of 15% of Gates? When Dodge purchased an additional 25% of Gate's interests, what is the amount of goodwill can be recognized? Select one: a. $17,000. b. $0 c. $15,400. d. $24,800.

Answer rating: 100% (QA)

The answer will be option a102000 It is because On 123120x1 Gates was appraised to be 680000 fair ... View the full answer