On January 1, 2020, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $3,500,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board, which gave it the ability to significantly influence Sauk Trail's operating and investing activities. The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow: Cash and receivables Computing equipment Patented technology Trademark Liabilities 2020 2021 Also, as of January 1, 2020, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a four-year remaining useful life. The trademark's useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost. During the next two years, Sauk Trail reported the following net income and dividends: Dividends Declared $190,000 200,000 Net Income $1,880,000 2,065,000 Req A $ Carrying Amount Goodwill 150,000 5,360,000 140,000 190,000 (225,000) a. How much of Ridge Road's $3,500,000 payment for Sauk Trail is attributable to goodwill? b. What amount should Ridge Road report for its equity in Sauk Trail's earnings on its income statements for 2020 and 2021? c. What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2020 and 2021? Req B and C Fair Value $ 150,000 6,340,000 4,080,000 2,080,000 (225,000) Complete this question by entering your answers in the tabs below. How much of Ridge Road's $3,500,000 payment for Sauk Trail is attributable to goodwill?
On January 1, 2020, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $3,500,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board, which gave it the ability to significantly influence Sauk Trail's operating and investing activities. The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow: Cash and receivables Computing equipment Patented technology Trademark Liabilities 2020 2021 Also, as of January 1, 2020, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a four-year remaining useful life. The trademark's useful life was considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost. During the next two years, Sauk Trail reported the following net income and dividends: Dividends Declared $190,000 200,000 Net Income $1,880,000 2,065,000 Req A $ Carrying Amount Goodwill 150,000 5,360,000 140,000 190,000 (225,000) a. How much of Ridge Road's $3,500,000 payment for Sauk Trail is attributable to goodwill? b. What amount should Ridge Road report for its equity in Sauk Trail's earnings on its income statements for 2020 and 2021? c. What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2020 and 2021? Req B and C Fair Value $ 150,000 6,340,000 4,080,000 2,080,000 (225,000) Complete this question by entering your answers in the tabs below. How much of Ridge Road's $3,500,000 payment for Sauk Trail is attributable to goodwill?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 19E
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Transcribed Image Text:On January 1, 2020, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $3,500,000
in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge
Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative
agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board, which gave it the
ability to significantly influence Sauk Trail's operating and investing activities.
The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow:
Cash and receivables
Computing equipment
Patented technology
Trademark
Liabilities
2020
2021
Also, as of January 1, 2020, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The
patented technology was estimated to have a four-year remaining useful life. The trademark's useful life was
considered indefinite. Ridge Road attributed to goodwill any unidentified excess cost.
During the next two years, Sauk Trail reported the following net income and dividends:
Dividends
Declared
$ 190,000
200,000
Net Income
$1,880,000
2,065,000
$
Req A
Carrying
Amount
150,000
5,360,000
140,000
190,000
(225,000)
a. How much of Ridge Road's $3,500,000 payment for Sauk Trail is attributable to goodwill?
b. What amount should Ridge Road report for its equity in Sauk Trail's earnings on its income statements for 2020 and
2021?
Goodwill
Fair Value
$
150,000
6,340,000
4,080,000
2,080,000
(225,000)
c. What amount should Ridge Road report for its investment in Sauk Trail on its balance sheets at the end of 2020
and 2021?
Req B and C
Complete this question by entering your answers in the tabs below.
How much of Ridge Road's $3,500,000 payment for Sauk Trail is attributable to goodwill?
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