On January 2,2008,Johnson Company acquired a 100% interest in the capital stock of Perth Company for $3,100,000.Any excess cost over book value is attributable to a patent with a 10-year remaining life.At the date of acquisition,Perth's balance sheet contained the following information:
Perth's income statement for 2008 is as follows:
The balance sheet of Perth at December 31,2008,is as follows:
Perth declared and paid a dividend of 20,000 FCU on October 1,2008.Spot rates at various dates for 2008 follow:
Assume Perth's revenues,purchases,operating expenses,depreciation expense,and income taxes were incurred evenly throughout 2008.

-Refer to the above information.Assuming Perth's local currency is the functional currency,what is the amount of patent amortization for 2008 that results from Johnson's acquisition of Perth's stock on January 2,2008.Round your answer to the nearest dollar.
A)$11,500
B)$11,884
C)$7,667
D)$9,394

Question

On January 2,2008,Johnson Company acquired a 100% interest in the capital stock of Perth Company for $3,100,000.Any excess cost over book value is attributable to a patent with a 10-year remaining life.At the date of acquisition,Perth's balance sheet contained the following information:
Perth's income statement for 2008 is as follows:
   The balance sheet of Perth at December 31,2008,is as follows:
Perth declared and paid a dividend of 20,000 FCU on October 1,2008.Spot rates at various dates for 2008 follow:
Assume Perth's revenues,purchases,operating expenses,depreciation expense,and income taxes were incurred evenly throughout 2008.
  
-Refer to the above information.Assuming Perth's local currency is the functional currency,what is the amount of patent amortization for 2008 that results from Johnson's acquisition of Perth's stock on January 2,2008.Round your answer to the nearest dollar.
A)$11,500 
B)$11,884 
C)$7,667 
D)$9,394

Quizplus · Accepted Answer

The excess cost over book value is $720,000 ($3,100,000 - $2,380,000). As the excess cost is attributable to a patent with a 10-year remaining life, the annual amortization of the patent would be $72,000 ($720,000 / 10 years). Since Perth's income statement shows amortization expense of $60,116 and the patent is the only intangible asset, the remaining $11,884 ($72,000 - $60,116) must be the amount of patent amortization resulting from Johnson's acquisition. Therefore, the correct answer is B, $11,884.

On January 2,2008,Johnson Company Acquired a 100% Interest in the Capital