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QUESTION
Question #1: Below are two unrelated cases involving marketable equity securities.
$800,000 (2013)
The excess of the acquisition price over the fair value of net assets acquired is assigned to goodwill. Since goodwill has an indefinite life, it is not amortized.
Required:
- Compute the value of IBM’s investment in ABC, Inc. as of December 31, 2014, under the equity method.
- Discuss the strengths and weaknesses of the income statement and balance sheet in reflecting the economic substance of this transaction and subsequent business activities using the equity method.
Your submission should:
- Be 1-2 pages for the written portion.
- Include the Excel spreadsheet with computations.
- Clearly separate your responses so your instructor knows the problems you are answering.
- Follow the APA format.
