Calculate the Investment in West Company

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Problem - On January 2, 2016, East Company acquired 30% of the stocks of West Company for $20 million in cash. East Company accounts for its investment using the equity method. At the time of acquisition, West Company's balance sheet was as follows (in millions):

Assets

Liab. and equity

Current Assets

20

Current Liabilities

42

Property and equipment, net

415

Long-term debt

518

Patents and trademarks

150

Capital Stock

12

 

 

Retained earnings

13

Total Assets

585

Total Liabilities and Equity

585

Valuation of West's assets and liabilities revealed that it's reported patents and trademarks (10-year life) had a fair value of $160 million and it had unrecognized brand names (15-year life) worth $9 million. West's December 31, 2018, retained earnings balance is $25 million. For 2018, it reported net income of $2.5 million and paid $650,000 in dividends.

Required -

1. Prepare the 2018 entries to report the above information on East's books? Show all your calculations.

2. Calculate the Investment in West Company, reported on East's December 31, 2018 balance sheet. Show all your calculations.

Reference no: EM132468519

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