Doulo Corporation acquires a 90 percent interest in Dalu Corporation on January 1, 2016, when Dalus equity
Question:
Doulo Corporation acquires a 90 percent interest in Dalu Corporation on January 1, 2016, when Dalu’s equity consists of $1,000,000 common stock and $500,000 retained earnings, and the book value of its net assets equals fair value. On December 31, 2016, Doulo Corporation and Subsidiary’s consolidated balance sheet consists of $50,000 goodwill and $90,000 unamortized patent with a ten-year remaining useful life.
1. What is the purchase price of the investment under entity theory?
a. $1,650,000
b. $1,495,000
c. $1,485,000
d. None of the above
2. What is the purchase price of the investment under traditional theory?
a. $1,350,000
b. $1,500,000
c. $1,650,000
d. None of the above
Intermediate Accounting
ISBN: 978-1259548185
8th edition
Authors: David Spiceland, James Sepe, Mark Nelson, Wayne Thomas