Question

On January 1, 20X8, Ramon Corporation acquired 75 percent of Tester Company's voting common stock for...

On January 1, 20X8, Ramon Corporation acquired 75 percent of Tester Company's voting common stock for $300,000. At the time of the combination, Tester reported common stock outstanding of $200,000 and retained earnings of $150,000, and the fair value of the noncontrolling interest was $100,000. The book value of Tester's net assets approximated market value except for patents that had a market value of $30,000 more than their book value. The patents had a remaining economic life of five years at the date of the business combination. Tester reported net income of $40,000 and paid dividends of $10,000 during 20X8.

What is the amount of Excess Depreciation that will be recorded for 20X8?

a.3000

b.5000

c.6000

d.30000

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Answer #1

For answer this question only need this statement

* The book value of Tester's net assets approximated market value except for patents that had a market value of $30,000 more than their book value.

*The patents had a remaining economic life of five years at the date of the business combination

Calculation of Excess Depreciation

Assets excess value = $30000

Useful life = year

Depreciation is calculated based straight line method

Depreciation = Cost / useful life

Excess Depreciation = 30000 / 5 = $6000

What is the amount of Excess Depreciation that will be recorded for 20X8?

Answer : c.6000

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