Question

On January 1st 2011, Green Corp purchased 20% of the outstanding voting common stock of Gold...

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

C. 315,000 is correct

 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

Intangible asset value at beginning = 300000-275000 = 25000

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