CHAPTER02 PROB 4 6 7

CHAPTER02 PROB 4 6 7 - Problem 4 Cost of 30% investment...

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Problem 4 Cost of 30% investment 1,500,000 Book value of Stergis 4,800,000 Blake’s ownership 30% 1,440,000 Purchase discrepancy 60,000 Allocated: FV - BV Buildings 84,000 x 30% 25,200 Dr Balance - goodwill 34,800 Dr Part A - Significant Influence January 1, Year 5 Investment in Stergis 1,500,000 Cash 1,500,000 To record purchase of 30% of Stergis. December 31, Year 5 Investment in Stergis 12,600 Investment Income 12,600 To record 30% of Stergis’s Year 5 net income. 30% x 42,000 = 12,600 Cash 18,000 Investment in Stergis 18,000 To record 30% of Stergis’s Year 5 dividends. 30% x 60,000 = 18,000 Investment income 2,520 Investment in Stergis 2,520 To record amortization of purchase discrepancy as follows: Building 25,200 / 10 years = 2,520 December 31, Year 6 Investment in Stergis 36,000 Investment income 36,000 To record 30% of Stergis’s Year 6 net income. 30% x 120,000 = 36,000

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Cash 18,000 Investment in Stergis 18,000 To record 30% of Stergis’s Year 6 dividends. 30% x 60,000 = 18,000
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This note was uploaded on 03/09/2011 for the course ACCT 354 taught by Professor Wilson during the Spring '11 term at Concordia AB.

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CHAPTER02 PROB 4 6 7 - Problem 4 Cost of 30% investment...

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