Picture Company (Picture) owns 90% of Snapshot Inc. (Snapshot). On January 1, 2022, the investment in...

 

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Picture Company (Picture) owns 90% of Snapshot Inc. (Snapshot). On January 1, 2022, the investment in Snapshot account had a balance of $350,000 and Snapshot's common shares and retained earnings on that date were valued at $200,000 and $100,889, respectively. Moreover, the assets to which the remaining acquisition differential relates had a remaining life of 10 years on that date. Picture uses the equity method to account for its investment in Snapshot. On January 1, 2022, Picture sold a depreciable asset to Snapshot for cash of $50,000 resulting in a before-tax gain of $10,000. On January 1, 2023, Snapshot sold a depreciable asset to Picture for cash of $80,000 resulting in a before-tax gain of $20,000. Both assets had remaining useful lives of 10 years on their respective sale dates. Note: neither transaction was a capital gain for tax purposes. The tax rate for both companies is 30%. Snapshot's net income and dividends for 2022 and 2023 are shown below. Net Income Dividends 2022 $80,000 $20,000 2023 $120,000 $30,000 What is the amount of the change to the acquisition differential for 2023? Picture Company (Picture) owns 90% of Snapshot Inc. (Snapshot). On January 1, 2022, the investment in Snapshot account had a balance of $350,000 and Snapshot's common shares and retained earnings on that date were valued at $200,000 and $100,889, respectively. Moreover, the assets to which the remaining acquisition differential relates had a remaining life of 10 years on that date. Picture uses the equity method to account for its investment in Snapshot. On January 1, 2022, Picture sold a depreciable asset to Snapshot for cash of $50,000 resulting in a before-tax gain of $10,000. On January 1, 2023, Snapshot sold a depreciable asset to Picture for cash of $80,000 resulting in a before-tax gain of $20,000. Both assets had remaining useful lives of 10 years on their respective sale dates. Note: neither transaction was a capital gain for tax purposes. The tax rate for both companies is 30%. Snapshot's net income and dividends for 2022 and 2023 are shown below. Net Income Dividends 2022 $80,000 $20,000 2023 $120,000 $30,000 What is the amount of the change to the acquisition differential for 2023?

Answer rating: 100% (QA)

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