On January 1, 2011, Jackie Corp. purchased 30% of the voting - 12311

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yousafbhutta

yousafbhutta

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  • Posted on: Sun 08 Jul, 2012
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2. On January 1, 2011, Jackie Corp. purchased 30% of the voting common stock of Rob Co., paying $2,000,000. Jackie properly accounts for this investment using the equity method. At the time of the investment, Rob's total stockholders' equity was $3,000,000. Jackie gathered the following information about Rob's assets. The book value of Rob’s assets total $3,500,000 and the fair value total $5,000,000.

Any excess of cost over fair value not attributed to assets was attributed to goodwill, which has not been impaired. Rob Co. reported net income of $300,000 for 2011, and paid dividends of $100,000 during that year.

How much goodwill is associated with this investment? (Points : 2)
        $(500,000)
        $0
        $650,000
        $1,000,000
        $2,000,000

Solution Description

2. On January 1, 2011, Jackie Corp. purchased 30% of the voting common stock of Rob Co., paying $2,000,000. Jackie properly accounts for this investment using the equity method. At the time of the investment, Rob's total stockholders' equity was $3,000,000. Jackie gathered the following info