Chapter 4, Problem 2DYS

Angela Corporation (a private company) acquired all of the outstanding voting stock of Eddy Tech, Inc., on January 1, 2018, in exchange for $9,000,000 in cash. At the acquisition date, Eddy Tech’s stockholders’ equity was $7,200,000 including retained earnings of $3,000,000.  At the acquisition date, Angela prepared the following fair value allocation schedule for its newly acquired subsidiary: At the end of 2018, Angela and Eddy Tech report the following amounts from their individually maintained account balances, before consideration of their parent-subsidiary relationship. Parentheses indicate a credit balance. Required: Prepare a 2018 consolidated income statement for Angela and its subsidiary Eddy Tech. Assume that Angela, as a private company, elects to amortize goodwill over a 10-year period.

On January 1, 2020, Ridge Road Company acquired 20 percent of the voting shares of Sauk Trail, Inc., for $2,700,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board, which gave it the ability to significantly influence Sauk Trail's operating and investing activities. The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow: Cash and Receivables Computing Equipment Patented Technology Trademark Liabilities 2020 2021 Carrying Amount $ 110,000 5,000,000 100,000 150,000 (185,000) Net Income $1,800,000 1,985,000 Also, as of January 1, 2020. Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented technology was…

On January 1, 2020, Ridge Road Company acquired 20 percent of the voting shares of Sauk Trail, Inc., for $2,700,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board, which gave it the ability to significantly influence Sauk Trail's operating and investing activities.   The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow:     Carrying Amount Fair Value Cash and receivables $ 110,000   $ 110,000   Computing equipment   5,000,000     5,700,000   Patented technology   100,000     4,000,000   Trademark   150,000     2,000,000   Liabilities   (185,000 )   (185,000 )     Also, as of January 1, 2020, Sauk Trail’s computing equipment had a…