Equity Method Investment with Basis Differences Several Years Later Saxton Corporation purchased 25 percent of Taylor Company's voting stock on January 1, 2013, for $3 million in cash. At the date of acquisition, Taylor reported its total assets at $60 million and its total liabilities at $56 million. Investigation revealed that Taylor's plant and equipment (15-year life) was overvalued by $1.8 million and it had an unreported customer database (2-year life) valued at $500,000. Taylor declares and pays $100,000 in dividends and reports net income of $250,000 in 2016. Required Prepare the necessary journal entries on Saxton's books to report the above information for 2016 assum- ing Saxton uses the equity method to report its investment in addition to above question, assume the following reports Taylor Company reported its net incomes and dividends as follows: Years Net Incomes Dividends 2013 $200,000 $100,000 2014 $300,000 $100,000 2015 $400,000 $100,000 What is the balance of Investment on January 1, 2016? How much goodwill is reported on Saxton Caompaany's balance sheet on December 31, 2015? Prepare the journal entries for 2016 income and dividends.

Equity Method Investment with Basis Differences Several Years Later Saxton Corporation purchased 25 percent of Taylor Company's voting stock on January 1, 2013, for $3 million in cash. At the date of acquisition, Taylor reported its total assets at $60 million and its total liabilities at $56 million. Investigation revealed that Taylor's plant and equipment (15-year life) was overvalued by $1.8 million and it had an unreported customer database (2-year life) valued at $500,000. Taylor declares and pays $100,000 in dividends and reports net income of $250,000 in 2016. Required Prepare the necessary journal entries on Saxton's books to report the above information for 2016 assum- ing Saxton uses the equity method to report its investment in addition to above question, assume the following reports Taylor Company reported its net incomes and dividends as follows: Years Net Incomes Dividends 2013 $200,000 $100,000 2014 $300,000 $100,000 2015 $400,000 $100,000 What is the balance of Investment on January 1, 2016? How much goodwill is reported on Saxton Caompaany's balance sheet on December 31, 2015? Prepare the journal entries for 2016 income and dividends.

Name: N9. Account Equity Method Investment with Basis Differences Several Ye
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Description: N9. Account Equity Method Investment with Basis Differences Several Years Later Saxton Corporationpurchased 25 percent of Taylor Company's voting stock on January 1, 2013, for $3 million in cash. Atthe date of acquisition, Taylor reported its total a

Auditing: A Risk Based-Approach to Conducting a Quality Audit

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Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

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