Goyard Corp, a privately-owned company, has 31 December year-end. The company has elected to apply ASPE for
Question:
Goyard Corp, a privately-owned company, has 31 December year-end. The company has elected to apply ASPE for its financial reporting. On January 1, 2016, Goyard Corp bought 3,000 of the 10,000 outstanding common shares of Investee Inc. for $65,000. Coyard Corp has a significant influence. On this date, Investee Inc. had assets and liabilities as follows:
As of January 1, 2016 | ||
Book Value | Fair Value | |
Assets not subject to depreciation | $ 54,000 | $ 65,000 |
Assets subject to depreciation (net) | 280,500 | 308,500 |
Liabilities | 180,500 | 180,500 |
The difference between book value and fair value were related to land and to equipment (which is estimated to have remaining 5-years of useful life and is depreciated using straight-line method).
At the fiscal year end December 31, 2016, Investee Inc. reported net Income of $50,000, and declared and paid total common dividends of $30,000. Goodwill was not impaired in 2016.
- How much goodwill is inherent in the purchase price?
- Give any required entries for Investor Limited’s books for the above events assuming that the equity method is used.
- Other than Equity Method, what other method is permitted under ASPE?
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach