QUESTION 35 Alpha owns 100% of the stock in Omega. On January 1, Year 1, Alpha...
QUESTION 35
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Alpha owns 100% of the stock in Omega. On January 1, Year 1, Alpha owns a patent with a cost of $20 million, and accumulated amortization of $5 million. It has 10 more years of expected useful life. Alpha uses the equity method for accounting for investments.
What would be the entries that Alpha would make in year 1 and 2 for this patent, if it continues to own it? Give two entries, one for each year.
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Now assume that Alpha sold the patent to Omega in Year 1, for $18 million. Answer these three questions.
What entry would Alpha make to record the sale of the patent?
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Who would amortize the patent in Year 1, and what would be the amount of the amortization?
What consolidation entry or entries, if any is needed in Year 1?
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QUESTION 35
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