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Prepare the journal entries required on the books

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Question - The condensed balance sheet of Schreiber Corporation as at September 30, 2020 is as follows:

Schreiber Corporation Balance Sheet September 30, 2020

Assets $995,772

Liabilities $358,605

Common shares 227,810

Retained earnings 409,357

Total liabilities and shareholders' equity $995,772

Included in Schreiber Corporation's assets is equipment with a fair value in excess of its net book value:

Fair value of equipment $304,120

Book value of equipment (estimated remaining useful life is 6 years) $243,296

Yellowstone Industries Inc. paid $206,340 on September 30, 2020 to acquire 28% of the common shares in Schreiber Corporation. Assume that this investment gives Yellowstone Industries significant influence over Schreiber Corporation.

On December 11, 2020, Schreiber Corporation declares and pays a total cash dividend of $22,600.

Schreiber Corporation's net income for the year ended September 30, 2021 is $156,998.

Assume that Yellowstone Industries uses the equity method to account for its investment in Schreiber Corporation.

Yellowstone Industries has a September 30 year end.

Required -

1. Calculate the amount of goodwill included in the $206,340 purchase price of the investment.

2. Prepare the journal entries required on the books of Yellowstone Industries to account for its investment in Schreiber Corporation on each of the following dates:

1. September 30, 2020.

2. December 11, 2020.

3. September 30, 2021.

Reference no: EM133085793

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