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On January 1, 2022, Pastel Inc. (Pastel) purchased 97,500 voting shares of Sunny Corporation (Sunny) for $253,500. Sunny has 150,000 outstanding voting. On that date, Sunny's common shares and retained earnings were valued at $60,000 and $90,000, respectively. Sunny's book values approximated its fair values on the acquisition date with the exception of the company's patent, which was estimated to have a fair value that was $70,000 in excess of its recorded book value. The patent had a useful life of 14 years on acquisition date. Both companies use straight line amortization exclusively. On January 1, 2023, Pastel purchased an additional 9,000 shares of Sunny on the open market for $27,000. On this date, Sunny's book values were equal to its fair values with the exception of the company's equipment, which is undervalued by $60,000. The equipment's estimated useful life is 5 years. Sunny's net income and dividends for 2022 and 2023 are as follows:

On January 1, 2022, Pastel Inc. (Pastel) purchased 97,500 voting shares of Sunny Corporation (Sunny) for $253,500. Sunny has 150,000 outstanding voting. On that date, Sunny's common shares and retained earnings were valued at $60,000 and $90,000, respectively. Sunny's book values approximated its fair values on the acquisition date with the exception of the company's patent, which was estimated to have a fair value that was $70,000 in excess of its recorded book value. The patent had a useful life of 14 years on acquisition date. Both companies use straight line amortization exclusively. On January 1, 2023, Pastel purchased an additional 9,000 shares of Sunny on the open market for $27,000. On this date, Sunny's book values were equal to its fair values with the exception of the company's equipment, which is undervalued by $60,000. The equipment's estimated useful life is 5 years. Sunny's net income and dividends for 2022 and 2023 are as follows:

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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! Required information On January 1, 2022, Pastel Inc. (Pastel) purchased 97,500 voting shares of Sunny Corporation (Sunny) for $253,500. Sunny has 150,000 outstanding voting. On that date, Sunny's common shares and retained earnings were valued at $60,000 and $90,000, respectively. Sunny's book values approximated its fair values on the acquisition date with the exception of the company's patent, which was estimated to have a fair value that was $70,000 in excess of its recorded book value. The patent had a useful life of 14 years on acquisition date. Both companies use straight line amortization exclusively. On January 1, 2023, Pastel purchased an additional 9,000 shares of Sunny on the open market for $27,000. On this date, Sunny's book values were equal to its fair values with the exception of the company's equipment, which is undervalued by $60,000. The equipment's estimated useful life is 5 years. Sunny's net income and dividends for 2022 and 2023 are as follows: Net Income Dividends 2022 $60,000 $9,000 2023 $80,000 $14,000 Neither company has contributed surplus on its separate-entity balance sheets at the end of 2022 or 2023. Sunny's goodwill suffered an impairment loss of $8,000 during 2022. Pastel uses the equity method to account for its investment in Sunny. Which of the following is the correct amount of goodwill arising from Pastel's January 1, 2022 acquisition?
Transcribed Image Text:! Required information On January 1, 2022, Pastel Inc. (Pastel) purchased 97,500 voting shares of Sunny Corporation (Sunny) for $253,500. Sunny has 150,000 outstanding voting. On that date, Sunny's common shares and retained earnings were valued at $60,000 and $90,000, respectively. Sunny's book values approximated its fair values on the acquisition date with the exception of the company's patent, which was estimated to have a fair value that was $70,000 in excess of its recorded book value. The patent had a useful life of 14 years on acquisition date. Both companies use straight line amortization exclusively. On January 1, 2023, Pastel purchased an additional 9,000 shares of Sunny on the open market for $27,000. On this date, Sunny's book values were equal to its fair values with the exception of the company's equipment, which is undervalued by $60,000. The equipment's estimated useful life is 5 years. Sunny's net income and dividends for 2022 and 2023 are as follows: Net Income Dividends 2022 $60,000 $9,000 2023 $80,000 $14,000 Neither company has contributed surplus on its separate-entity balance sheets at the end of 2022 or 2023. Sunny's goodwill suffered an impairment loss of $8,000 during 2022. Pastel uses the equity method to account for its investment in Sunny. Which of the following is the correct amount of goodwill arising from Pastel's January 1, 2022 acquisition?
Which of the following is the correct amount of goodwill arising from Pastel's January 1, 2022 acquisition? Multiple Choice О $59,500 О $70,000 О $240,000 О $170,000
Transcribed Image Text:Which of the following is the correct amount of goodwill arising from Pastel's January 1, 2022 acquisition? Multiple Choice О $59,500 О $70,000 О $240,000 О $170,000
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