Huey Company acquires 100% of the stock of Solar Corporation on January 1, 2019, for $2,400,000 cash. As of that date Solar hadthe following account balances:CashAccounts receivableInventoryBuilding-net (10 year life)Equipment-net (5 year life)LandAccounts PayableBonds Payable (Face amount $1,000,000,due 12/31/2023)Common stockAdditional paid-in capitalRetained earningsSelect one:Book Value$630,000775,000350,0001,000,000 900,000300,000400,000600,000900,000125,000 125,000A. $60,000B. $50,000C. $80,000D. $10,000Fair value$630,000775,000400,0002,000,000500,000250,000780,000In 2019 and 2020, Solar had net income of $250,000 and $240,000, respectively. In addition, Solar paid dividends of $16,000 inboth years. Inventory is assumed to be sold in 2019. Assume straight line amortization/ depreciation for assets and bondspayable.Compute the AAP amortization for 2019.2,050,000

The amortization is the method on which the value of an intangible asset is decreased and thus the…

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Business

Accounting

Compute the AAP amortization for 2019.

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

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Huey Company acquires 100% of the stock of Solar Corporation on January 1, 2019, for $2,400,000 cash. As of that date Solar had
the following account balances:
Cash
Accounts receivable
Inventory
Building-net (10 year life)
Equipment-net (5 year life)
Land
Accounts Payable
Bonds Payable (Face amount $1,000,000,
due 12/31/2023)
Common stock
Additional paid-in capital
Retained earnings
Select one:
Book Value
$630,000
775,000
350,000
1,000,000 900,000
300,000
400,000
600,000
900,000
125,000 125,000
A. $60,000
B. $50,000
C. $80,000
D. $10,000
Fair value
$630,000
775,000
400,000
2,000,000
500,000
250,000
780,000
In 2019 and 2020, Solar had net income of $250,000 and $240,000, respectively. In addition, Solar paid dividends of $16,000 in
both years. Inventory is assumed to be sold in 2019. Assume straight line amortization/ depreciation for assets and bonds
payable.
Compute the AAP amortization for 2019.
2,050,000

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