On January 1, 2014, Compton Co. paid $20,000 for a 20% interest in General Enterprises. General’s stockholders’ equity amounted to $40,000 on that date. The excess of purchase price over book values was due to an unrecorded patent valued at $60,000 with a 10-year life. During 2014, General Enterprises reported income of $10,000 and paid dividends of $2,000. During 2015, it reported income of $15,000 and dividends of $3,000. Assume that Compton has significant influence over the operations of General.
a. Calculate the amount of goodwill, if any?
b. Calculate Equity Income for 2014?
c. Calculate the balance in the Equity Investment account at December 31, 2014?d. Calculate Equity Income for 2015?e. Calculate the balance in the Equity Investment account at December 31, 2015?
