On January 1, 2012, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts on January 1, 2012: Kaltop earned net income for 2012 of $126,000 and paid dividends of $48,000 during the year.
The 2012 total amortization of allocations is calculated to be
A) $4,000.
B) $6,400.
C) $(2,400).
D) $(1,000).
E) $3,800.

Question

On January 1, 2012, Cale Corp. paid $1,020,000 to acquire Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. The following information is available for Kaltop's assets, liabilities, and stockholders' equity accounts on January 1, 2012:  Kaltop earned net income for 2012 of $126,000 and paid dividends of $48,000 during the year.
The 2012 total amortization of allocations is calculated to be
A) $4,000. 
B) $6,400. 
C) $(2,400). 
D) $(1,000). 
E) $3,800.

Quizplus · Accepted Answer

Building = FV $268,000 - BV $240,000 = $28,000/20 yrs = $1,400 Equipment = FV $516,000 - BV $540,000 = ($24,000)/10 yrs = ($2,400)($2,400) + $1,400 = ($1,000)