Parent purchased 100% of Sub on 1/1/20x1. The worksheet that follows was prepared immediately after purchase. The
Question:
Parent purchased 100% of Sub on 1/1/20x1. The worksheet that follows was prepared immediately after purchase. The purchase price reflects the following information. All fair and book values are the same except as noted. The fair value of Inventory is $940 (Sub uses LIFO), of Copyrights is $450 (5 years remain), of Prop., Plant, & Equip. is $2,800 (8 years remain), and of Land is $1,000. In a prior year, Sub issued an $8,000 noninterest-bearing note payable. The note was recorded at its net present value discounted at the then market rate of 6%. Its balance on Sub’s books reflects the use of effective interest. The note has a fair value of $5,970, as the market rate is now 5% on 1/1/20x1. The note is due in six years. The Sub has brand names with a fair value of $120, with an indefinite life, and patents worth $300, having a 10-year remaining life. Amortizations are done on a straight-line basis, except for the note, which uses effective interest. The following parts are unrelated except as noted. Round all numbers to nearest whole dollar.
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson