Documente Academic
Documente Profesional
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1. D
2. B
3. C
5. D
1
8. (continued)
18. (Equity entries for one year, includes prospective application of equity
method)
JANUARY 1, 2018 (Date significant influence is attained)
2
Purchase price of 30% of Seida’s stock ...................................... $600,000
Fair value of original 10% investment in Seida ........................... 200,000
Total fair value of 40% investment in Seida ................................ 800,000
Book value of Seida stock ($1,850,000 × 40%) ............................ (740,000)
Fair value in excess of book value ............................................... $ 60,000
Excess cost assigned to undervalued land
($120,000 × 40%)....................................................................... (48,000)
Trademark ...................................................................................... $ 12,000
Remaining life of Trademark ........................................................ 8 years
Annual Amortization ..................................................................... $ 1,500
Journal Entries:
To record acquisition of Seida stock.
Investment in Seida ................................................... 600,000
Cash ...................................................................... 600,000
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Gain on sale of 12,000 shares of Sedgwick:
Cost of initial acquisition—2016 ..................................................... $1,480,000
25% income accrual—2016 .............................................................. 85,000
25% of dividends—2016 ................................................................... (30,000)
25% income accrual—2017 .............................................................. 120,000
25% of dividends—2017 ................................................................... (35,000)
25% income accrual for ½ year—2018 ............................................ 75,000
25% of dividends for ½ year—2018................................................. (20,000)
Book value of 75,000 shares on July 1, 2018 ........................... $1,675,000
Cash proceeds from the sale: 12,000 shares × $25 ......................... $300,000
Less: book value of shares sold: $1,675,000 × (12,000 ÷ 75,000) ..... 268,000
Gain on sale ................................................................................. $ 32,000