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On January 1 20X5 Pond Corporation acquired 80 percent of Skate Company s stock by issuing common stock with a fair value of $180000 At that date

On January 1, 20X5, Pond Corporation acquired 80 percent of Skate Company s stock by issuing common stock with a fair value of $180,000. At that date, Skate reported net assets of $150,000. The fair value of the noncontrolling interest was $45,000. Assume Pond uses the fully adjusted equity method. The balance sheets for Pond and Skate at January 1, 20X8, and December 31, 20X8, and income statements for 20X8 were reported as follows:  Additional Information 1. In 20X2, Skate developed a patent for a high-speed drill bit that Pond planned to market extensively. In accordance with generally accepted accounting standards, Skate charges all research and development costs to expense in the year the expenses are incurred. At January 1, 20X5, the market value of the patent rights was estimated to be $50,000. Pond believes the patent will be of value for the next 20 years. The remainder of the differential is assigned to buildings and equipment, which also had a 20-year estimated economic life at January 1, 20X5. All of Skate s other assets and liabilities identified by Pond at the date of acquisition had book values and fair values that were relatively equal. 2. On December 31, 20X7, Pond sold a building to Skate for $65,000 that it had purchased for $125,000 and depreciated on a straight-line basis over 25 years. At the time of sale, Pond reported accumulated depreciation of $75,000 and a remaining life of 10 years. 3. On July 1, 20X6, Skate sold land that it had purchased

Apr 22 2020 View more View Less

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