On January 1, 2013, Spark Corp. acquired a 15% interest in Cranston Inc. for $69,825 cash and obtained the ability to significantly influence the operations of Cranston Inc.On that date, Cranston's balance sheet disclosed net assets of $430,000and a trademark (20 year life) was determined to be undervalued by$35,500.During 2013, Cranston reported net income of $100,000 and paid cash dividends of $30,000. Spark sold inventory costing $40,000 to Cranston during 2013 for $50,000. Cranston used but $5,000 all of this merchandise in its operations during 2013.
Evaluate the initial purchase to determine whether either goodwill or incremental asset values need to be reflected within the equity method procedures.
Consideration given
Percentage of book value acquired
Payment in excess of book value
Excess payment identified with specific assets
Trademark (20 year life)
Excess payment not identified with specific assets - Goodwill