Player Corporation purchased 100 percent of Scout Company's common stock on January 1, 20X5, and paid...

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Question

Player Corporation purchased 100 percent of Scout Company's common stock on January 1, 20X5, and paid...

Player Corporation purchased 100 percent of Scout Company's common stock on January 1, 20X5, and paid $37,000 above book value. The full amount of the additional payment was attributed to amortizable assets with a life of eight years remaining at January 1, 20X5. During 20X5 and 20X6, Scout reported net income of $38,000 and $7,000 and paid dividends of $16,000 and $13,000, respectively. Player uses the equity method in accounting for its investment in Scout and reported a balance in its investment account of $176,000 on December 31, 20X6.

Required:
Compute the amount paid by Player to purchase Scout shares.

business accounting

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Answer 1

Answer #1

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Explanation :

Particulars	Amount	Amount
Investment Balance on Dec. 31, 2016		$1,76,000
Increase Account Balance during 2015 :-
Less : Income of 2015	$-38,000
Add : Amortized Difference Amount ($37,000/8 years)	$ 4,625
Add : Dividend of 2015	$ 16,000	$ -17,375
Decrease Account Balance during 2016 :-
Less : Income of 2016	$ -7,000
Add : Amortized Difference Amount ($37,000/8 years)	$ 4,625
Add : Dividend of 2015	$ 13,000	$ 10,625
Investment Balance on Date of Purchase		$1,69,250

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Answer 2

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Player Corporation purchased 100 percent of Scout Company's common stock on January 1, 20X5, and paid...

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