On January 1, 2010, Espy Corp. purchased 30% of the voting common stock of Sport

Question

On January 1, 2010, Espy Corp. purchased 30% of the voting common stock of Sports Co., paying $2,300,000. Espy decided to use the equity method to account for this investment. At the time of the investment, Sports Co's total stockholders' equity was $6,000,000. Sports Co. had franchise agreements with a fair market value of $500,000. The table above has some information about Sports Co's assets on the date of acquisition. For all other assets and liabilities, book value and fair market value were equal. Assuming that the franchise agreements are amortized over a period of five years, what is the total amortization for 2010?

Sports co. Estima tedBook Fair Market Useful Life ValueValue 300000 500000 1 0 Buildings Equipment 1200000 1300000 For all other a ssets and liabilities, book value and fair maket value were equa

Explanation / Answer

Answer:Calculation of total Amottization for 2010:

Building=([500000-300000]/10 years)*30%=$5000

Equipment=([1300000-1200000]/5 years)*30%=$6000

Franchise=[500000*30%]/5 years=$30000

Total Amortization=$41000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

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