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Packard Inc. is a public company. On January 1, 2020 Packard Inc. purchased 10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had common shares of $225,000 and retained earnings of $475,000 on this date. Packard considered Saturn a FVTPL investment; as it did not give Packard significant influence. On December 31, 2020 the Saturn shares were trading at $13.00 per share. On January 1, 2021, Packard purchased an additional 25% of Saturn's shares for $217,000 in cash. This second purchase allowed Packard to exert significant influence over Saturn. The following information was available on the date of acquisition: Carrying Value Fair Value Assets not subject to depreciation $205,000 Assets subject to depreciation (10 year useful life) 750,000 Patent (7 year useful life) 35,000 Liabilities 115,000 115,000 Saturn depreciates assets using the straight-line method and has a 35% tax rate. During the two years, Saturn reported the following: Dividends Declared $275,000 $75,000 $175,000 $115,000 Additional Information Saturn pays any dividends declared in cash on January 1 of the subsequent year. On December 31, 2021, an impairment test revealed that Packard's share of Saturn's goodwill was impaired by $10,000. The 2021 net income included a loss from discontinued operations of $40,000 (net of tax). REQUIRED: Prepare all of Packard's journal entries for 2020 and 2021 related to Packard's investment in Saturn. Net Income 2020 2021 $205,000 620,000

Packard Inc. is a public company. On January 1, 2020 Packard Inc. purchased 10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had common shares of $225,000 and retained earnings of $475,000 on this date. Packard considered Saturn a FVTPL investment; as it did not give Packard significant influence. On December 31, 2020 the Saturn shares were trading at $13.00 per share. On January 1, 2021, Packard purchased an additional 25% of Saturn's shares for $217,000 in cash. This second purchase allowed Packard to exert significant influence over Saturn. The following information was available on the date of acquisition: Carrying Value Fair Value Assets not subject to depreciation $205,000 Assets subject to depreciation (10 year useful life) 750,000 Patent (7 year useful life) 35,000 Liabilities 115,000 115,000 Saturn depreciates assets using the straight-line method and has a 35% tax rate. During the two years, Saturn reported the following: Dividends Declared $275,000 $75,000 $175,000 $115,000 Additional Information Saturn pays any dividends declared in cash on January 1 of the subsequent year. On December 31, 2021, an impairment test revealed that Packard's share of Saturn's goodwill was impaired by $10,000. The 2021 net income included a loss from discontinued operations of $40,000 (net of tax). REQUIRED: Prepare all of Packard's journal entries for 2020 and 2021 related to Packard's investment in Saturn. Net Income 2020 2021 $205,000 620,000

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter16: Retained Earnings And Earnings Per Share
Section: Chapter Questions
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Packard Inc. is a public company. On January 1, 2020 Packard Inc. purchased 10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had common shares of $225,000 and retained earnings of $475,000 on this date. Packard considered Saturn a FVTPL investment; as it did not give Packard significant influence. On December 31, 2020 the Saturn shares were trading at $13.00 per share. On January 1, 2021, Packard purchased an additional 25% of Saturn's shares for $217,000 in cash. This second purchase allowed Packard to exert significant influence over Saturn. The following information was available on the date of acquisition: Carrying Value Fair Value Assets not subject to depreciation $205,000 Assets subject to depreciation (10 year useful life) 750,000 Patent (7 year useful life) 35,000 Liabilities 115,000 115,000 Saturn depreciates assets using the straight-line method and has a 35% tax rate. During the two years, Saturn reported the following: Dividends Declared $275,000 $75,000 $175,000 $115,000 Additional Information Saturn pays any dividends declared in cash on January 1 of the subsequent year. On December 31, 2021, an impairment test revealed that Packard's share of Saturn's goodwill was impaired by $10,000. The 2021 net income included a loss from discontinued operations of $40,000 (net of tax). REQUIRED: Prepare all of Packard's journal entries for 2020 and 2021 related to Packard's investment in Saturn. Net Income 2020 2021 $205,000 620,000
Transcribed Image Text:Packard Inc. is a public company. On January 1, 2020 Packard Inc. purchased 10,000 common shares (15%) of Saturn Inc. for $115,000 in cash. Saturn had common shares of $225,000 and retained earnings of $475,000 on this date. Packard considered Saturn a FVTPL investment; as it did not give Packard significant influence. On December 31, 2020 the Saturn shares were trading at $13.00 per share. On January 1, 2021, Packard purchased an additional 25% of Saturn's shares for $217,000 in cash. This second purchase allowed Packard to exert significant influence over Saturn. The following information was available on the date of acquisition: Carrying Value Fair Value Assets not subject to depreciation $205,000 Assets subject to depreciation (10 year useful life) 750,000 Patent (7 year useful life) 35,000 Liabilities 115,000 115,000 Saturn depreciates assets using the straight-line method and has a 35% tax rate. During the two years, Saturn reported the following: Dividends Declared $275,000 $75,000 $175,000 $115,000 Additional Information Saturn pays any dividends declared in cash on January 1 of the subsequent year. On December 31, 2021, an impairment test revealed that Packard's share of Saturn's goodwill was impaired by $10,000. The 2021 net income included a loss from discontinued operations of $40,000 (net of tax). REQUIRED: Prepare all of Packard's journal entries for 2020 and 2021 related to Packard's investment in Saturn. Net Income 2020 2021 $205,000 620,000
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