Company P purchased an 80% interestin Company S on January 1, 2016, for$800,000. Onthe purchase date, Company Sstockholders'equity was $800,000.Any excess of fair value overbook value was attributed to a patentwith a 10-year remaining life. In 2016,Company P reportedinternally generated net incomebefore taxes of $150,000. Company Sreported a net incomebefore taxes of $70,000. The firms filea consolidated tax return at a 30% taxrate. Thenondeductible portion of excessamortization isA - 20 000B 15 000C - 4 000D - $0 (The amortization is fullydeductible)

The amortization deduction is taken over the useful life of the asset, which is generally the period…

Answered: Company P purchased an 80% interest in…

Company P purchased an 80% interest in Company S on January 1, 2016, for $800,000. On the purchase date, Company S stockholders' equity was $800,000. Any excess of fair value over

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Company P purchased an 80% interest
in Company S on January 1, 2016, for
$800,000. On
the purchase date, Company S
stockholders'
equity was $800,000.
Any excess of fair value over
book value was attributed to a patent
with a 10-year remaining life. In 2016,
Company P reported
internally generated net income
before taxes of $150,000. Company S
reported a net income
before taxes of $70,000. The firms file
a consolidated tax return at a 30% tax
rate. The
nondeductible portion of excess
amortization is
A - 20 000
B 15 000
C - 4 000
D - $0 (The amortization is fully
deductible)

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