Reference no: EM133104934
Question - On January 1, Jarel acquired 80% of the outstanding voting stocks of Suarez for $260,000 cash consideration. The remaining 20% of Suarez had an acquisition-date fair value of $65,000. On January 1, Suarez possessed equipment (5-year life) that was undervalued on its book by $25,000. Suarez also had developed several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded in Suarez's financial records, were estimated to have a 20-year future life.
As of December 31, the financial statements appeared as follows:
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Jarel
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Suarez
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Revenues
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(300,000)
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(200,000)
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Cost of GoodsSold
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140,000
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80,000
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Expenses
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20,000
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10,000
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Equity in Investee Income
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(70,000)
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|
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Net Income
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(210,000)
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(110,000)
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Retained Earnings, 1/1
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(300,000)
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(150,000)
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Net Income
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(210,000)
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(110,000)
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Dividend Paid
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0
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0
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Retained Earnings, 12/31
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(510,000)
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(260,000)
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Cash and receivables
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210,000
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90,000
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Inventory
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150,000
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110,000
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Investment in Suarez
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330,000
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|
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Equipment (net)
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440,000
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300,000
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Total Assets
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1,130,000
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500,000
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Liabilities
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(420,000)
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(140,000)
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Common Stock
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(200,000)
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(100,000)
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Retained Earnings 12/31
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(510,000)
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(260,000)
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Total Liabilities and Equity
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(1,130,000)
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(500,000)
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During the year, Jarel bought inventory for $80,000 and sold it to Suarez for $100,000. Of these goods, Suarez still owns 60% on December 31.
Required -
1. What is the goodwill at the acquisition date?
2. What is the ECOBV amortization?
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