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Question
On January 1, 2018, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $240 million cash. At the date of acquisition of the stock, Lake's net assets had a fair value of $600 million. Their book value was $500 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference. Lake's net income for the year ended December 31, 2018, was $120 million. During 2018, Lake declared and paid cash dividends of $30 million. The buildings have a remaining life of 10 years.
Required:
1. What are all appropriate journal entries related to the investment during 2018, assuming Cameron accounts for this investment by the equity method.
2. Determine the amounts to be reported by Cameron.
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