Reference no: EM133098566

Question - Facts - 1. An investor company acquired 30% of the common stock of an investee company for $105,000 cash on January 1, 2021. At this date, the investee reported net assets equal to $225,000.

2. The investee's net assets had historical book values that approximately equaled their fair values, except for a customer list that had a fair value equal to $22,500 but a book value of $7,500. The customer list has a 5-year remaining useful life at January 1, 2021.

3. The investee reported net income of $30,000 and paid dividends of $15,000 during both 2021 and 2022.

4. During 2021, the investor sold $3,000 of merchandise to the investee. The investor's profit margin is 25% on all of its sales. The investee sold 60% of this "intercompany" inventory to non-affiliates during 2021 and the remaining inventory to non-affiliates during 2022.

Required -

1. Determine the "Investment in Investee" balance on the investor's books at January 1, 2021.

2. Discuss how this balance relates to the amounts recognized on the investee's balance sheet.

3. Identify the specific net assets for which fair values differ from book value and allocate an amount to each of these net assets.