Question

Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2018. for $400 million. At the date of purchase, the book value of Vancouver's net assets was $775 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $20 million for the plant facilities. The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2018. Vancouver reported net income of $140 million for the year ended December 31, 2018. Vancouver paid a cash dividend of $30 million. Required: 1. Prepare all appropriate jou mal entries related to the investment during 2018. 2. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2018? 3. What amount should Northwest report in its balance sheet as its investment in Vancouver? 4. What should Northwest report in its statement of cash flows regarding its investment in Vancouver?

Answer 1

Qiy impact in cash flow for Investment in VTM i operating eashflow - $ 12 millions inflow Prilesting cash How & 400 Millions out flow to

Jussmate Date Page Debit Il Journal entries for Increatment made & Velenue I earned in Vanover Timber 4 Milling inc., DATE Credit particulars. January ($) and 2018 Investments in sharw of yTM, Inc $400 tillions - To cash $uopillions (Being 40% of shares of VTM, in purchase 21st Dec L 2018 Investment in shares of VTM, Inc $56 Millions. - To Investment Revenue $56 millions ($140 Millions profit X 40%) (Being Revenue on shares recorded as Inome) cash ALL - To Investment in Shara of VTH, in $12 millions Being cash received which recorded as - $12 millions revenue above (40% 8 $30 millons) 31st Dil 2018 37 Dil 2018 Investment Revenue - $2 Milhons To Investment in sharut VTM, Inc $21761 Lions (40.). 285 Millions which above book Value) Being Inventory adjustment made) 21st bcc Investment Revenue $0.5 Millions 2018 To Investment in shares of VTM, Inc $0.5 milions yo'l of ($20 Millions/16years) Bring depreciation adjustment on Fixed Asset O REDMI NOTE 8 PROSxkint above book valve) O AI QUAD CAMERA

Date Page 2. Date 31st Dic 2018 Investment Revenue AK (sin Mill Particulars Art Date particulars Argount Inventory 31st share of Inome sb DEL, 2018| 31st Dec 2018 Depreciation o.s 31st Dic Balanield 5315 2018 I 56 I There for Northwest $ 53.5 Millions in van cover for should as year report & 56 ani Income from Investment - ended December 31, 2018 3. Investment Date January 2h 2018 . in VTM shares (8 in Millions) Amount Date particulars Apmot 40o 3Nt Dec Diviends 1 12 Partiolars cash 2018 shared Income 56 21st Dec 2018 31st Dec, | 2018 Inventory 395 Dic Deprelation 10.5 2016 3 lut De Balance eld 44.5 456 should report $441.5 Millions as in VTM, Inc., 456 Therefore Nortwest & Investment Þ REDMI NOTE 8 PRO
ffor solving answe amount is $millions