Please show all calculations. Thank you! Format Painter Forn Number Clipboard Fo
ID: 2547547 • Letter: P
Question
Please show all calculations. Thank you! Format Painter Forn Number Clipboard Font Alignment 022 11 Problem #1-Due Thursday, March 20, 2018 (note: this is a change to the date shown in the syllabus) Puppy, Inc. acquired the following investment in Cookie Enterprises on January 1, 2018. You are to assume Puppy accounts 12 for the Cookie Investment under the equity method Acquisition Value Percentage of outstanding shares acquired Book value of Cookie at date of acquisition s 5,000,000 50% S 8,000,000 15 17 Any difference between acquisition and fair market values is attributable to fixed assets with aremaining useful life of During 2018, Cookie Enterprises reported the following 4 years Net Income Dividends declared and paid Fair value of the company at December 31, 2018 s 1,000,000 1,200,000 $ 11,000,000 20 23 24 Required: 1. Prepare the acquistion value calculation on January 1, 2018 26 2. Prepare the 2018 journal entries necessary to account for the investmentExplanation / Answer
ans.1
Fair Market value of company as on dec,31 2018 = $11,000,000
Book value of cookie at date of acquisition i.e jan,1 2018 = $8,000,000
Fair market value as on date of acquisition :-
FMV on dec,31 2018 = 11,000,000
Less Net Income = 1,000,000
Add. dividend paid = 1,200,000
FMV as on 1st jan 2018 = 11,200,000
50% shared acquired by Puppy Inc in Cookie Enterprise = 11,200,000*50% = 5,600,000
acquisition value = 5,000,000
Capital reserve = 6,000,00
ans.2
For Puppy Inc.
Investments in Cookie Enterprises A/c Dr.
To Cash a/c
5000000
For Cookie Enterprises
Cash Dr.
Loss on sale of equity shares
To Puppy inc. A/c
5000000
6,000,00
5000000
Date Particulars Dr. Cr. 1st jan 2018Investments in Cookie Enterprises A/c Dr.
To Cash a/c
50000005000000
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