On 1/1/2015, Choco paid $150,000 to acquire 15% of the voting common stock of Cookie. Following...

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On 1/1/2015, Choco paid $150,000 to acquire 15% of the voting common stock of Cookie. Following...

On 1/1/2015, Choco paid $150,000 to acquire 15% of the voting common stock of Cookie. Following is the financial information about Cookie.

Book value of assets	$450,000
Book value of liabilities	$125,000
Net income (2015)	$80,000
Dividends (2015)	$40,000
Fair market value of investment 1/1/2015 Fair market value of investment 12/31/2015	$160,000 $180,000

Cookie has a patent with book value of $5,000 but actually $25,000 with 8 years remaining life.

Q1: 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?

business accounting

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Answer 1

Answer #1

Q1)	As the investment is less than 20% of the voting common stock in Cookie, the 'fair value' method should be used.
Q2)	Balance in the investment account (Fair value) at 12/31/2015 =	$ 1,80,000
Q3)	Cash	40000
	Dividend revenue		40000

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Answer 2

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On 1/1/2015, Choco paid $150,000 to acquire 15% of the voting common stock of Cookie. Following...

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2. On 1/1/2015, Choco paid $150,000 to acquire 40% of the voting common stock of Cookie....

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3. On 1/1/2015, Choco paid $92,000 to acquire 10% of the voting common stock of Cookie....

3. On 1/1/2015, Choco paid $92,000 to acquire 10% of the voting common stock of Cookie....

3. On 1/1/2015, Choco paid $92,000 to acquire 10% of the voting common stock of Cookie....

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On 1/1/2015, Choco paid $150,000 to acquire 15% of the voting common stock of Cookie. Following...

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Add Answer to: On 1/1/2015, Choco paid $150,000 to acquire 15% of the voting common stock of Cookie. Following...

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On 1/1/2015, Choco paid $150,000 to acquire 15% of the voting common stock of Cookie. Following...