On January 1st 2011, Green Corp purchased 20% of the outstanding voting common s
ID: 2343001 • Letter: O
Question
On January 1st 2011, Green Corp purchased 20% of the outstanding voting common stock of Gold Company for $300000. The book value of the acquired shares was $275000. The excess of cost over book value is attributable to an intangible asset on Gold's books that was undervalued and had a remaining useful life of 5 years. For the year ended December 31st 2011, Gold reported net income of $125000 and paid cash dividends of $25000. What is the carrying value of Greens investment in Gold at December 31st 2011?
A. $320,000
B. $300,000
C. $315,000
D. $295,000
Explanation / Answer
C. 315,000 is correct
Intangible asset value at beginning = 300000-275000 = 25000
Particulars Amount Explanation Investment amount 300,000 Add: share of earnings 25,000 =125000*20% Less: share of dividends 5,000 =25000*20% Less: Intangible written off 5,000 =25000/5 Closing balance 315,000