Homework Answers
a) compute the carrying value of net assets
| Particulars | amount ($) |
| Cash and receivables | 170000 |
| Computing equipment | 5540000 |
| Patented technology | 160000 |
| Trade mark | 210000 |
| Carrying value of total assets | 6080000 |
| (-) liabilities | (245000) |
| Carrying value of net assets | 5835000 |
compute amount of rr's payment for ST attributable to Goodwill as follow
| Particular | amount ($) |
| Payment by RR | 3900000 |
| (-) book value acquired (5835000×25%) | (1458750) |
| Payment in excess of book value | 2441250 |
| Excess payment identified in specific assets | |
| Computing equipment (6660000 - 5540000)= 1120000×25%= | (280000) |
| Patent technology (4120000 - 160000)= 3960000×25%= | (990000) |
| Trade mark (2120000 - 210000) = 1910000×25%= | (477500) |
| GOODWILL | 693750 |
b) what amount should RR report for it's equity in ST ? earning on income statement 2017 and 2018
Year 2017
| Particular | amount ($) |
| Income reported by ST 2017 | 1920000 |
| RR Ownership | 25% |
| Accural for 2017(1920000×25%)= | 480000 |
| Less amortization expenses | |
| Computing equipment (6660000 - 5540000)/7×25% | `(40000) |
| Patented technology (4120000 - 160000)/3×25% | (330000) |
| equity in ST earnings for 2017 | 110000 |
year 2018
| Particular | amount ($) |
| Income reported by ST in 2018 | 2105000 |
| RR Ownership | 25% |
| Accural for 2018(2105000×25%) | 526250 |
| (-) amortization expenses | |
| Computing equipment (6660000 - 5540000)/7×25% | (40000) |
| Patented technology (4120000 - 160000)3×25% | (330000) |
| Equity in ST earnings for 2018 | 156250 |
c) what amount should RR report for it's investment in ST on its balance sheet at the end 2017 and 2018
Year 2017
| Particular | amount ($) |
| Cost of investment in ST 2017 | 3900000 |
| Add equity in ST earnings for 2017 | 110000 |
| Less shares in dividends ( 210000×25%) | (52500) |
| Investment in ST to be reported in balance sheet for 2017 | 3957500 |
Year 2018
| Particular | amount ($) |
| Investment in ST reported on balance sheet for 2017 | 3957500 |
| Add equity in ST earnings for 2018 | 156250 |
| Less shares in dividends (220000×25%) | (55000) |
| Investment in ST to be reported in balance sheet for 2018 | 4058750 |
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