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ACCT 549 Week 1 Homework
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1-28
Hobson acquires 40 percent of the outstanding voting stock of Stokes
Company on January 1, 2012, for $210,000 in cash. The book value
of Stokes’s net assets on that date was $400,000, although one of the
company’s buildings, with a $60,000 carrying value, was actually
worth $100,000. This building had a 10-year remaining life. Stokes
owned a royalty agreement with a 20-year remaining life that was
undervalued by $85,000.
Stokes sold inventory with an original cost of $60,000 to Hobson
during 2012 at a price of $90,000. Hobson still held $15,000 (transfer