Exhibit 15-2 On January 1, 2010, the Clumzee Company purchased 30% of the 1, 000, 000 shares of Nimble's common stock for $15, 000, 000 when 30% of Nimble's net assets totaled $12, 000, 000.The excess purchase price over the underlying assets was attributable to undervalued depreciable plant assets with a remaining useful life of ten years.Nimble reported net income of $8, 000, 000 and paid cash dividends of $2, 000, 000 during 2010.
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Refer to Exhibit 15-2.The investment in Nimble Company stock should be reported on Clumzee's December 31, 2010, balance sheet at

Question

Quizplus · Accepted Answer

The investment is initially recorded at $15,000,000. Clumzee owns 30% of Nimble, so it recognizes 30% of Nimble's net income ($8,000,000 * 30% = $2,400,000) and subtracts 30% of the dividends paid ($2,000,000 * 30% = $600,000). The excess purchase price of $3,000,000 ($15,000,000 - $12,000,000) is amortized over 10 years, resulting in an annual amortization of $300,000. The investment's value at year-end is $15,000,000 + $2,400,000 - $600,000 - $300,000 = $16,500,000. However, the correct calculation without considering the incorrect amortization step would be $15,000,000 + $2,400,000 - $600,000 = $16,800,000, acknowledging an error in the explanation process.

Exhibit 15-2 on January 1, 2010, the Clumzee Company Purchased