Reference no: EM132822963
Question - On 1/1/2015, Choco paid $92,000 to acquire 10% of the voting common stock of Cookie. In 1/1/2016, Choco acquired additional 20% of the voting common stock of Cookie for $210,000.
Following is the financial information about Cookie.
Book value of net assets 1/1/2015 $800,000
Net income (2015) $180,000
Net income (2016) $210,000
Dividends (2015) $80,000
Dividends (2016) $100,000
Land undervalued 12/31/2015 $60,000
Land undervalued 12/31/2016 $70,000
All excess payment will be recorded using Trademark which has useful life of 9 years in 2016.
During the year, there was no fair market value adjustment for Cookie.
Q1: In 2015, what method should be used to record this investment?
Q2: What is the balance of the investment account in Cookie at 12/31/2015?
Q3: What is the journal entry to record for dividends paid by Cookie at 12/31/2015?
Q4: In 2016, after additional 20% acquisition of Cookie, what method should be used to record this investment for 2015 and 2016?
Q5: Calculate trademark in 2015 that will be recorded in 2016 (if any).
Q6: Calculate annual amortization of under/overvalued asset and Trademark in 2015.