P Corp Owns 800 Voting Common Shares Out of Q Corp

question 54

Multiple Choice

P Corp. owns 800 voting common shares out of Q Corp.'s 1,000 outstanding voting common shares, which it accounts for using the equity method. On December 31, 2018, the shareholder's equity section of Q Corp. was comprised of $15,000 in common shares and retained earnings with the amount of $450,000. Q Corp. reported net Income and paid dividends of $120,000 and $20,000 respectively for the year ended December 31, 2019.
There have been no goodwill impairment losses since acquisition.
On January 1, 2020, P Corp. sold 200 shares of its investment in Q Corp. for $125,000. On January 1, 2019, the investment account had a balance of $420,000. The acquisition differential was to be allocated as follows:
60% to patents (6 year remaining life) .
30% to equipment (9 year remaining life) .
How much of the acquisition differential was allocated to patents on January 1, 2019?

• A) Nil
• B) $6,000
• C) $18,000
• D) $36,000

---

Definitions:

Frame of the Interaction

The context or environment in which interactions occur, shaping perceptions and behaviors of the participants.

Qualified Candidate

An individual who possesses the skills, experience, and qualifications necessary for a particular job or role.

Situated Identity

The concept that an individual's identity and social position are shaped by the context or environment in which they are situated.

Identity Degradation

A response to repeated or glaring failures that destroys the offender’s current identity and transforms him or her into a “lower” social type.