On January 1, 2015, the Regal Company purchased 30% of the outstanding voting stock of the Air Corporation for $300,000; the book value of Air's net assets at the date of purchase was $900,000. Regal was willing to pay more than the book value of the acquired shares because Air's depreciable assets with a ten-year remaining life were undervalued. Regal uses straight-line depreciation. During 2015, Air reported net income of $75,000 and paid dividends of $30,000.
-The income reported by Regal during 2015 pertaining to the Air investment was

Question

Quizplus · Accepted Answer

$19,500 = $22,500 ($75,000 × 30%)- $3,000 (*$30,000/10 years)*$300,000 (amount paid)- $270,000 (book value acquired: $900,000 × 30%)= depreciable asset allocation

On January 1, 2015, the Regal Company Purchased 30% of the Outstanding