On 1-1-2011, the company REGAL purchased 30% of the outstanding voting shares of company ARON for $600,000. The book value of ARON's net assets at the date of purchase was $1,800,000. REGAL was willing to pay more than the book value of the acquired shares solely because ARON's depreciable assets with a 10-year remaining life were undervalued. REGAL uses straight-line depreciation. During 2011, ARON reported net income of $150,000 and paid dividends of $60,000. The fair value of the investment in ARON as of 31-12-2011 was $590,000. Ass
On 1-1-2011, the company REGAL purchased 30% of the outstanding voting shares of company ARON for $600,000. The book value of ARON's net assets at the date of purchase was $1,800,000. REGAL was willing to pay more than the book value of the acquired shares solely because ARON's
Assume REGAL uses the fair value method (classified as fair value through profit or loss) to account for its investment in ARON. The income reported by REGAL during 2011 pertaining to the ARON investment was:
(PLEASE PROVIDE EXPLAINTION)
A) $10,000
B) $42,000
C) $63,000
D) $39,000
E) None of the above.
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