Pawn Corporation purchased 30 percent of Shop Company’s common stock on January 1, 20X5, by issuing preferred stock with a par value of $50,000 and a market price of $120,000. The following amounts relate to Shop's balance sheet items at that date:
Pawn Corporation purchased 30 percent of Shop Company’s common stock on January 1, 20X5, by issuing
| Book Value | Fair Value | |
|---|---|---|
| Assets | ||
| Cash & Receivables | $ 200,000 | $ 200,000 |
| Buildings & Equipment | 400,000 | 360,000 |
| Less: |
(100,000) | |
| Total Assets | $ 500,000 | |
| Liabilities & Equities | ||
| Accounts Payable | $ 50,000 | 50,000 |
| Bonds Payable | 200,000 | 200,000 |
| Common Stock | 100,000 | |
| 150,000 | ||
| Total Liabilities & Equities | $ 500,000 |
Shop purchased buildings and equipment on January 1, 20X0, with an expected economic life of 20 years. No change in overall expected economic life occurred as a result of the acquisition of Pawn's stock. The amount paid in excess of the fair value of Shop's reported net assets is attributed to unrecorded copyrights with a remaining useful life of eight years. During 20X5, Shop reported net income of $40,000 and paid dividends of $10,000.
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