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On January 1, 2012, Hanson Inc

question 42

Multiple Choice

On January 1, 2012, Hanson Inc. purchased 54,000 voting shares out of Marvin Inc.'s 90,000 outstanding voting shares for $240,000. On that date, Marvin's common stock and retained earnings were valued at $60,000 and $90,000, respectively. Marvin's book values approximated its fair values on the acquisition date with the exception of the company's equipment, which was estimated to have a fair market value that was $50,000 in excess of its recorded book value. The equipment was estimated to have a useful life of eight years. Both companies use straight line amortization exclusively. On January 1, 2013, Hanson purchased an additional 9,000 shares of Marvin Inc. on the open market for $45,000. On this date, Marvin's book values were equal to its fair market values with the exception of the company's equipment, which is now thought to be undervalued by $60,000. Moreover, the equipment's estimated useful life was revised to 5 years on this date. Marvin's net Income and dividends for 2012 and 2013 are as follows: Marvin's goodwill suffered an impairment loss of $5,000 during 2012. Hanson Inc. uses the equity method to account for its investment in Marvin Inc. By how much would the non-controlling interest amount have changed as a result of the Hanson's second purchase?

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Introductory

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