Part A. Use the following fact pattern to answer multiple choice questions 1 through 15, with sub-instructions for particular questions:

 On January 1, 2018, Parent Co. acquired 80% of Sub Inc. by paying $800,000. Non-controlling interest was valued at $200,000. Sub reported common stock on that date of $520,000 with retained earnings of $352,000. A building was undervalued in the company's financial records by $18,000. This building had a ten-year remaining life. Copyrights of $80,000 were not recognized and should be amortized over 20 years. Sub earned income and paid cash dividends as follows: 

Net Income Dividends Paid

2018 115,000 64,600

2019 144,400 71,600

2020 164,000 94,000

On December 31, 2020, the Parent owed $20,800 to Sub Inc. There have been no changes in Sub's common stock account since the acquisition.

To answer questions 1 through 3, prepare the allocation of the acquisition on January 1, 2018. In your presentation, but sure to show the excess fair value over cost allocated to the identifiable assets, and any resulting goodwill. In addition, for the identifiable assets, be sure to calculate the annual amortization of excess fair value over book value.

1. What is the fair value of Sub Co. at the acquisition date (1/1/18)?

A. $825,000.

B. $1,000,000.

C. $800,000.

D. $200,000.

2. How much is the allocation of the excess fair value allocated to copyright?

A. $64,000.

B. $8,000.

C. $72,000.

D. $80,000.

3. The goodwill resulting from this 80% acquisition is?

A. $30,000.

B. $24,000.

C. $48,000.

D. $0.