Answer numbers 17 and 18 for Ace Accountants At the start of the year, Ace Ac co

Question

Answer numbers 17 and 18 for Ace Accountants At the start of the year, Ace Ac countants, Inc purchased 30% of Bean Counters Inc (BCI) for $45 million. At the time of the purchase, the book value of BCI's net assets was $75 million. The fair market value of BCI's assets was $15 million in excess of their book value. For the year, BCI reported net income of $75million and paid $15 million in dividends. The remaining life of BCI's depreciable assets is 10 years. The entire difference between book value and fair value of Bean's assets is due to depreciable assets. 17. What is the amount of goodwill purchased by Ace? 18. The total amount of additional depreciation to be recognized over the remaining life of the assets is: 19. What is the value of Ace's Investment Account at the end of the year?

Explanation / Answer

17) Goodwill = Price paid - Fair value of asset

= $45m - (75+15)*30%

= $45m - $27m

= $18m

18) New Depreciation = New Fair Value / New useful life

= $90m/10yrs

= $9m per yr

Previous Depreciation = $7.5

Additional Increase in Dep = $9 -7.50

= $1.50

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