Reference no: EM132748959
Question: Giant Inc. acquires 10% of Small Corporation on January 1, 2010, for $90,000 when the book value of Small was $800,000. On that date, Small Corporation had a patent that was undervalued in its books by $100,000 with a useful life of 10 years.
During 2010 Small reported net income of $125,000 and declared and paid dividends of $30,000. The company classifies the investment as available for sale securities. During 2011, Small earned net income of $100,000 and declared and paid dividends of $20,000.
On January 1, 2012, Giant purchased an additional 20% of Small for $325,000, giving Giant the ability to significantly influence the operating policies of Small. On that date, a patent with a useful life of 8 years was undervalued by $110,000. During 2012, Small, reported net income of $150,000 and declared and paid dividends of $30,000.
Required: - Create schedule showing the allocation of the consideration transferred in relation to the acquisition made on January 1, 2012.
- Prepare the necessary journal entry(ies) for the year 2012?
- Calculate the balance of the Investment in Small account that would be reported in
- Giant's Balance Sheet at December 31, 2012.
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