At the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $45 million. At the time of purchase, the carrying value of Sky Tech's net assets was $75 million. The fair value of Sky Tech's depreciable assets was $15 million in excess of their book value. For this year, Sky Tech reported a net income of $75 million and declared and paid $15 million in dividends. The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is:

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Business

Esther Barnes

16 October, 13:05

At the start of the current year, SBC Corp. purchased 30% of Sky Tech Inc. for $45 million. At the time of purchase, the carrying value of Sky Tech's net assets was $75 million. The fair value of Sky Tech's depreciable assets was $15 million in excess of their book value. For this year, Sky Tech reported a net income of $75 million and declared and paid $15 million in dividends. The total amount of additional depreciation to be recognized by SBC over the remaining life of the assets is:

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Steve Mcbride · Answer 1

additional depreciation 4,500,000

Explanation:

fair value exceed book value 15,000,000

SBC proportion of Sky Tech 30%

addtional depreciation 4,500,000

Since the company have higher fair value than book value of his asset SBC will proceed to elimintate the difference at year-end when the assets are depreciate.

For the question given, the information about net income and dividends is irrelevant.