Northwest Paperboard Company, a paper and allied products manufacturer, was seek
ID: 2716840 • Letter: N
Question
Northwest Paperboard Company, a paper and allied products manufacturer, 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, 2013, for $600 million.
At the date of purchase, the book value of Vancouver's net assets was $875 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 $5 million for the inventory and by $30 million for the plant facilities.
The estimated useful life of the plant facilities is 15 years. All inventory acquired was sold during 2013.
Vancouver reported net income of $220 million for the year ended December 31, 2013. Vancouver paid a cash dividend of $60 million.
Prepare all appropriate journal entries related to the investment during 2013. (If no entry is required for a particular 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))
2. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2013? (Enter your answer in millions. Round your answer to 1 decimal place.)
What amount should Northwest report in its balance sheet as its investment in Vancouver? (Enter your answer in millions. Round your answer to 1 decimal place.)
What should Northwest report in its statement of cash flows regarding its investment in Vancouver?(Enter your answers in millions.)
Northwest Paperboard Company, a paper and allied products manufacturer, 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, 2013, for $600 million.
Explanation / Answer
Answer:1 Prepare all appropriate journal entries related to the investment during 2013.
1/2 Investment in Vancouver shares 600,000,000
To Cash 600,000,000
Cash (40% x 60,000,000) 24,000,000
To Investment in Vancouver shares 24,000,000
12/31 Investment in Vancouver shares 88,000,000
To Investment revenue 88,000,000
(40% x 220,000,000)
12/31 Investment revenue 800,000
To Investment in Vancouver shares 800,000
40% x (30,000,000 ÷ 15)
12/31 Investment revenue (40% x 5,000,000) 2,000,000
To Investment in Vancouver shares 2,000,000
Answer:2 Calculation of the amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2013
$85200,000: (88,000,000 share of income – 800,000 depreciation –2,000,000 inventory sale)
Answer:3 Calculation of the amount should Northwest report in its balance sheet as its investment in Vancouver is $661.2
Answer:4 Operating cash flow $ 24 million inflow
Investing cash flow $ 600 million outflow
Investment in Vancouver Cost 600 Dividend 24 Share of Income 88 Depreciation adjustment 0.8 Inventory adjustment 2 Balance 661.2 Total 688 Total 688Related Questions
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