Question

On January 1, 2021, Green Corporation purchased 26% of the outstanding voting common stock of Gold Company for $300,300. The book value of the acquired shares was $276,000. The excess of cost over book value is attributable to an intangible asset on Gold's books that was undervalued and had a remaining useful life of five years. For the year ended December 31, 2021, Gold reported net income of $125,350 and paid cash dividends of $25,800. What is the carrying value of Green's investment in Gold at December 31, 2021?

Answer 1

Answer:

the  carrying value should be $321,323

Explanation:

The computation of the carrying value should be given below:

= Initial investment + share of net income reported by Gold - share of dividends from gold - Amortization of intangible asset.

= $300,300 + (26% of 125,350) - (26% of $25,800) - {($300,300 - $276,000) ÷ 5}

= $300,300 + $32,591 - $6,708 - $4,860

= $321,323

hence, the  carrying value should be $321,323