Company A paid $85 million on January 2 of the current year for 4 million shares of Company B's common stock. The Investment represents a 30% Interest in the net assets of Company B and gave Company A the ability to exercise significant influence over Company B's operations. Company A received dividends of $2 per share on December 21 of the current year, and Company B reported net income of $50 million for the year ended December 31 of the current year. The fair value of Company B's common stock at December 31 of the current year was $26.50 per share. The book value of Company B's net assets was $200 million. ⚫ The fair value of Company B's depreciable assets exceeded their book value by $40 million. These assets had an average remaining useful life of twelve years. ⚫ The remainder of the excess of the cost of the Investment over the book value of net assets purchased was attributable to goodwill. Required: Complete the table below and prepare the appropriate journal entries related to the Investment during the current year..
Company A paid $85 million on January 2 of the current year for 4 million shares of Company B's common stock. The Investment represents a 30% Interest in the net assets of Company B and gave Company A the ability to exercise significant influence over Company B's operations. Company A received dividends of $2 per share on December 21 of the current year, and Company B reported net income of $50 million for the year ended December 31 of the current year. The fair value of Company B's common stock at December 31 of the current year was $26.50 per share. The book value of Company B's net assets was $200 million. ⚫ The fair value of Company B's depreciable assets exceeded their book value by $40 million. These assets had an average remaining useful life of twelve years. ⚫ The remainder of the excess of the cost of the Investment over the book value of net assets purchased was attributable to goodwill. Required: Complete the table below and prepare the appropriate journal entries related to the Investment during the current year..
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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