【正文】 s b o o k sA m o r t i z e t h e d i f f e r e n c e o v e r t h e r e m a i n i n g u s e f u l l i f e o f t h e a s s o c i a t e d a s s e t .G o o d w i l l F o r f i s c a l y e a r s b e g i n n i n g o n o r a f t e r D e c . 1 5 , 2 0 0 1 , G o o d w i l l w i l l b e c a r r i e d f o r w a r d w i t h o u t a d j u s t m e n t u n t i l t h e i n v e s t m e n t i s s o l d o r a p e r m a n e n t d e c l i n e i n v a l u e o c c u r s .122 Excess of Cost Over BV Acquired (Continued…) The amortization of the difference associated with the undervalued assets is recorded as a reduction of both the Investment account and the Equity in Investee Ine account. G E N E R A L J O U R N A L Pa g e D a t e D e s c r i pt i on D e bi t C r e di tYe a r Eq u i ty i n I n v e s te e I n c o m e $$$$En d I n v e s tm e n t i n I n v e s te e $$$$123 ?Grande Company is negotiating the acquisition of 30% of the outstanding shares of Chico Company. ?Chico’s balance sheet reports assets of $500,000 and liabilities of $300,000 for a book value of $200,000. ?Upon review, Grande determines that Chico’s equipment is undervalued in the financial records by $60,000, and of its patents is also undervalued, but only by $40,000. ?How much should Grande offer Chico?? Excess of Cost Over BV Example 124 ?By adding these valuation adjustments to Chico’s book value, Grande arrives at an estimated $300,000 worth for the pany’s assets. Based on this putation, Grande should offer $90,000 for a 30% share of the investee’s outstanding stock. Excess of Cost Over BV Example Solution 125 Excess of Cost Over BV – Example Amortization Payment by investor . . . . . . . . . . . . . . . . . . . $90,000 Percentage of book value acquired ($200,000*30%) . . . . . . . . . . . . . . 60,000 Payment in excess of book value . . . . . . . . . . . 30,000 Excess payment identified with specific assets: Equipment (30% of $60,000 undervalued). . .$18,000 Patent (30% of $40,000 undervalued) . . . . . . . 12,000 30,000 Excess payment not identified with specific assets—goodwill . . . . . . . . . . . . . . –0– 126 G E N E R A L J O U R N A L Pa g e D a t e D e s c r i pt i on D e bi t C r e di t3 1 D e c Eq u i ty i n I n v e s te e I n c o m e 4 , 2 0 0 I n v e s tm e n t i n I n v e s te e 4 , 2 0 0 Amortization of Cost Over BV Example Amortization (Continued) 127 A s s e t FM V A dj us t m e nt Li f e r e m a i ni ng A m or t i z a t i onEq u i p m e n t 1 8 , 0 0 0 1 0 y e a r s 1 , 8 0 0Pa te n t 1 2 , 0 0 0 5 y e a r s 2 , 4 0 0 G o o d w i l l I n d e fi n i te A n n u a l e x p e n s e y e a r s 1 5 4 , 2 0 0 Amortization of Cost Over BV Example Amortization (Continued) 128 Note, that any ADDITIONAL amount paid in excess of the book value of $90,000 would be the cost of the goodwill purchased – and would not be amortized like the other assets. P12 Illustration Special Procedures for Special Situations Reporting a change to the equity method. Reporting investee ine from sources other than continuing operations. Reporting