Company P acquired 60% of the outstanding common stock of Company S by issuing common stock with a market value of $420,000 on January 1, 20X3. The balance sheet of Company S was as follows on the acquisition date: The market values were as follows: Inventory, $130,000; Land, $150,000; Building, $400,000. The inventory was sold during 20X3, the building has a 10-year life, and any excess purchase price is attributed to goodwill. What adjustment is needed to consolidated net income to arrive at cash flow-operations for 20X4, under the indirect method, as a result of amortization of excesses from the purchase?

Question

Company P acquired 60% of the outstanding common stock of Company S by issuing common stock with a market value of $420,000 on January 1, 20X3. The balance sheet of Company S was as follows on the acquisition date:  The market values were as follows: Inventory, $130,000; Land, $150,000; Building, $400,000. The inventory was sold during 20X3, the building has a 10-year life, and any excess purchase price is attributed to goodwill. What adjustment is needed to consolidated net income to arrive at cash flow-operations for 20X4, under the indirect method, as a result of amortization of excesses from the purchase?

Quizplus · Accepted Answer

The Answer is D

Company P Acquired 60% of the Outstanding Common Stock of Company