On April 1, 2013, BigBen Company acquired 35% of the shares of LittleTick, Inc.

Question

On April 1, 2013, BigBen Company acquired 35% of the shares of LittleTick, Inc. BigBen paid $131,000 for the investment, which is $40,000 more than 35% of the book value of LittleTick's identifiable net assets. BigBen attributed $12,500 of the $40,000 difference to inventory that will be sold in the remainder of 2013, and the rest to goodwill. LittleTick recognized a total of $16,000 of net income for 2013, and paid a total of $10,600 of dividends to shareholders. Assume net income and dividends accrue evenly throughout the year. BigBen's investment in LittleTick will affect BigBen's 2013 net income by rev: 03_25_2013_QC_28243 Earnings of $4,200. A loss of $8,300. Earnings of $2,730. Earnings of $1,470.

Explanation / Answer

Answer: A loss of $8,300

(35%)(¾ of the year)($16,000) – $12,500 = ($8300)

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.