P Corp Owns 800 Voting Common Shares Out of Q Corp

question 53

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 equipment on January 1, 2019?

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

---

Definitions:

Goal Clarity

The degree to which the objectives or aims of a task or project are clearly understood and defined.

Management Objectives

The specific goals or targets set by managers aimed at guiding operational execution and strategic direction.

Jointly Setting

Jointly setting involves collaboratively establishing goals, objectives, or standards with the involvement and agreement of all relevant parties.

Personal Development

The ongoing process of understanding and developing oneself in order to achieve one's fullest potential.