On January 1, 2022, Cullumber Corp. bought 31,000 shares of the available 100,000 common shares of Iceberg Inc., a publicly tradedfirm. This acquisition provided Cullumber with significant influence. Cullumber paid $719,000 cash for the investment. At the time ofthe acquisition, Iceberg reported assets of $2,507,000 and liabilities of $1,215,000. Asset values reflected fair market value, exceptfor capital assets that had a net book value of $502,000 and a fair market value of $747,000. These assets had a remaining useful lifeof five years. For 2022 Iceberg reported net income of $409,000 and paid total cash dividends of $100,000.On May 16, 2023, Cullumber sold 15,500 of its shares in Iceberg for $425,000. Cullumber has no immediate plans to sell its remaininginvestment in Iceberg.Iceberg is actively traded, and stock price information follows:January 1, 2022$29December 31, 2022$31January 1, 2023$32Assuming Cullumber is using the equity method under ASPE, did the initial investment include a payment for goodwill?Payment for goodwill$At the end of 2022, what would appear on the income statement and balance sheet of Cullumber in connection with itsinvestment in Iceberg?Investment income on income statement$Investment account on balance sheet$Provide the entry to account for Cullumber's sale of the shares in May 2023. (Credit account titles are automatically indented whenthe amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.List debit entry before credit entry.)Account TitlesDebitCreditHow should Cullumber account for its remaining investment in Iceberg?Under ASPE, Cullumber can choose theinvestment in Iceberg.for its remaining

Investment means an asset purchased in expectation of earning a return on such investment in future…

On January 1, 2022, Cullumber Corp. bought 31,000 shares of the available 100,000 common shares of Iceberg Inc., a publicly traded firm. This acquisition provided Cullumber with significant influence. Cullumber paid $719,000 cash for the investment. At the time of the acquisition, Iceberg reported assets of $2,507,000 and liabilities of $1,215,000. Asset values reflected fair market value, except for capital assets that had a net book value of $502,000 and a fair market value of $747,000. These assets had a remaining useful life of five years. For 2022 Iceberg reported net income of $409,000 and paid total cash dividends of $100,000. On May 16, 2023, Cullumber sold 15,500 of its shares in Iceberg for $425,000. Cullumber has no immediate plans to sell its remaining investment in Iceberg.

On January 1, 2022, Cullumber Corp. bought 31,000 shares of the available 100,000 common shares of Iceberg Inc., a publicly traded firm. This acquisition provided Cullumber with significant influence. Cullumber paid $719,000 cash for the investment. At the time of the acquisition, Iceberg reported assets of $2,507,000 and liabilities of $1,215,000. Asset values reflected fair market value, except for capital assets that had a net book value of $502,000 and a fair market value of $747,000. These assets had a remaining useful life of five years. For 2022 Iceberg reported net income of $409,000 and paid total cash dividends of $100,000. On May 16, 2023, Cullumber sold 15,500 of its shares in Iceberg for $425,000. Cullumber has no immediate plans to sell its remaining investment in Iceberg.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

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

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

Chapter12: Auditing Long-lived Assets And Merger And Acquisition Activity

Section: Chapter Questions

Problem 37RQSC

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