Piano acquired 80% of the common stock of Sitar for $140,000 cash on January 1, 2024. At this date, Sitar reported net assets equal to $150,000.  Sitars net assets had historical book values that approximately equaled their fair values, except for a customer list that had a fair value equal to $15,000 but a book value of $5,000. The customer list has a 5-year remaining useful life at January 1, 2024.  Sitar reported net income of $20,000 and paid dividends of $10,000 during both 2024 and 2025.  During 2024, Piano sold $2,000 of merchandise to Sitar. Pianos profit margin is 25% on all of its sales. Sitar sold 50% of this intercompany inventory to non-affiliates during 2024 and the remaining\ inventory to non-affiliates during 2025. 

Required: 

Determine the Investment in Sitar balance at January 1, 2024. 

Discuss how this balance relates to the\ amounts recognized on Sitars balance sheet? 

Identify the specific net assets for which fair values differ from book value and allocate an amount to each of these net assets.

Answer rating: 100% (QA)

To determine the Investment in Sitar balance at January 1 2024 1 Purchase price for 80 of Sitars com... View the full answer