Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $277,500. Steal reported the following net income and dividend payments: Dividends Paid Year Net Income 20x7 $ 45,000 $ 25,000 20X8 35,000 10,000 20X9 55,000 30,000 On January 1, 20X7, Steal had $250,000 of $6 par value common stock outstanding and retained earnings of $150,000, and the fair value of the noncontrolling interest was $185,000. Steal held land with a book value of $23,500 and a market value of $31,000 and equipment with a book value of $335,000 and a market value of $375,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of 10 years. All depreciable assets held by Steal at the date of acquisition had a remaining economic life of eight years. Required: a. Compute the increase in the fair value of patents held by Steal. Increase in fair value

Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $277,500. Steal reported the following net income and dividend payments: Dividends Paid Year Net Income 20x7 $ 45,000 $ 25,000 20X8 35,000 10,000 20X9 55,000 30,000 On January 1, 20X7, Steal had $250,000 of $6 par value common stock outstanding and retained earnings of $150,000, and the fair value of the noncontrolling interest was $185,000. Steal held land with a book value of $23,500 and a market value of $31,000 and equipment with a book value of $335,000 and a market value of $375,000 at the date of combination. The remainder of the differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of 10 years. All depreciable assets held by Steal at the date of acquisition had a remaining economic life of eight years. Required: a. Compute the increase in the fair value of patents held by Steal. Increase in fair value

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Purchase Corporation purchased 60 percent of Steal Company ownership on January 1, 20X7, for $277,500. Steal reported the
following net income and dividend payments:
Dividends
Paid
Year Net Income
20X7 $ 45,000 $ 25,000
20X8
55,000
35,000
10,000
20X9
30,000
On January 1, 20X7, Steal had $250,000 of $6 par value common stock outstanding and retained earnings of $150,000, and the fair
value of the noncontrolling interest was $185,000. Steal held land with a book value of $23,500 and a market value of $31,000 and
equipment with a book value of $335,000 and a market value of $375,000 at the date of combination. The remainder of the
differential at acquisition was attributable to an increase in the value of patents, which had a remaining useful life of 10 years. All
depreciable assets held by Steal at the date of acquisition had a remaining economic life of eight years.
Required:
a. Compute the increase in the fair value of patents held by Steal.
Increase in fair value

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