On January 1, 20X0, Hanson Inc. purchased 54,000 of Marvin Ltd.’s 90,000 outstanding voting shares for $240,000. On that date, Marvin Ltd.’s ordinary shares and retained earnings were valued at $60,000 and $90,000 respectively. Marvin Ltd.’s book values approximated its fair values on the acquisition date with the exception of the company’s equipment, which was estimated to have a fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of eight years. Both companies use straight-line amortization exclusively. On January 1, 20X1, Hanson Inc. purchased an additional 9,000 shares of Marvin Ltd. on the open market for $45,000. On this date, Marvin Ltd.’s book values were equal to its fair market values with the exception of the company’s equipment, which is now thought to be undervalued by $70,000. The equipment was estimated to have a remaining useful life of seven years. Marvin Ltd.’s net income and dividends for 20X0 and 20X1 are as follows:

20X0 20X1
Net income $60,000 $80,000
Dividents $9,000 $14,000

Requirement:

Assuming that Hanson Inc. uses the fair value enterprise method to value NCI, what is the amount of the parent’s share of the acquisition differential amortization for 20X1?

Answer rating: 100% (QA)

To calculate the parents share of the acquisition differential amortization for 20X1 we need to cons... View the full answer