Northwest Paperboard Company, a paper and allied products manufacture, was seeki

Question

Northwest Paperboard Company, a paper and allied products manufacture, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2016, for $570 million. At the date of purchase, the book value of Vancouver's net assets was $860 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $10 million for the inventory and by $15 million for the plant facilities. inventory acquired was sold during 2016 December 31, 2016. Vancouver paid a cash dividend of $30 million. Required The estimated useful ife of the plant facilities is 12 years. All Vancouver reported net income of $190 million for the year ended 1. Prepare all appropriate journal entries related to the investment during 2016. (lf no entry is required for a transaction/event, select No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)

Explanation / Answer

1)Journal Entries ($ in millions) Date Accounts Title and explanation Debit Credit Jan.2 2016 Investment in Vancouver Shares $570.00 Cash $570.00 (To Record Purchase) Dec.31 2016 Investment in Vancouver Shares ($190 M x 40%) $76.00 Investment revenue $76.00 (To Record Net Income) Dec.31 2016 Cash (40% x $30 million) $12.00 Investment in Vancouver Shares $12.00 (To Record Dividends) Dec.31 2016 Investment revenue ($10 million x 40%) $4.00 Investment in Vancouver Shares $4.00 (To record Inventory adjustment) Dec.31 2016 Investment revenue ($15 million x 40%)/15 years $0.40 Investment in Vancouver Shares $0.40 (To record Depreciation adjustment) b) Investment Revenue = $76 - $4 - $.40 $71.60 Million c) Investment in Vancouver = $570+$76 - $12 - $4 -$.40 $629.60 Million d) Operating Cash Flow $12 Million Inflow Dividend Investing Cash Flow $570 Million Outflow Investment

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