On January 1, 2020, Choco Co. pays $96,000 to acquire 30% of the voting common stock of Cake Inc. Choco uses the equity method to account for its investment. At the time of the investment, Cake had net assets with a book value of $240,000 and with one undervalued net asset building which is undervalued in book by $30,000 (remaining useful life 15 years on 1/1/20). During 2020, Cake reported net income of $100,000 and paid dividends of $60,000. Any excess cost over book value is attributable to goodwill with an indefinite life What is annual amortization of FV>BV (i.e., undervalued building)?
2. On January 1, 2020, Choco Co. pays $96,000 to acquire 30% of the voting common stock of Cake Inc. Choco uses the equity method to account for its investment. At the time of the investment, Cake had net assets with a book value of $240,000 and with one undervalued net asset building which is undervalued in book by $30,000 (remaining useful life 15 years on 1/1/20). During 2020, Cake reported net income of $100,000 and paid dividends of $60,000. Any excess cost over book value is attributable to
What is annual amortization of FV>BV (i.e., undervalued building)?
Under the equity method, the amortization is provided on the excess amount of asset over its book value.
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