Homework Answers
1.
| ($ in millions) | Investee Net Assets | Ownership Interest | Net Assets Purchased | Difference | Attributable to: | |||
| Cost | $ 170 | |||||||
| Fair value Lake Construction's assets | $ 700 | x | 10 | % | = | $ 70 | $ 100 | Goodwill |
| Book value Lake Construction's assets | $ 600 | x | 10 | % | = | $ 60 | $ 10 | Undervaluation of assets |
| Depreciation adjustment: | Years | Adjustment | ||||||
| Investment revenue | $ 5 | / | 5 | = | $ 1 |
2.
| Transaction | General Journal | Debit | Credit |
| 1 | Investment in equity affiliate | 170 | |
| Cash | 170 | ||
| (To record the investment in Lake Construction shares) | |||
| 2 | Investment in equity affiliate | 17 | |
| Investment revenue (10% x $170) | 17 | ||
| (To record the share in net income of Lake Construction) | |||
| 3 | Cash (10% x $20) | 2 | |
| Investment in equity affiliate | 2 | ||
| (To record the cash dividends received) | |||
| 4 | Investment revenue | 1 | |
| Investment in equity affiliate | 1 | ||
| (To record the adjustment for depreciation) |
3.
| a. Investment in Cameron's 2021 balance sheet ($170 + $17 - $2 - $1) | $ 184 |
| b. Investment revenue in the income statement ($17 - $1) | $ 16 |
| c. Investing activities in the statement of cash flows | $ -170 |
Cash dividends received is reported under operating activities.
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THANK YOU!
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Exercise 12-23 (Algo) Equity method [L012-6, 12-7] On January 1, 2021, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $360 million cash, giving Cameron the ability to exercise significant influence over Lake's operations. At the date of acquisition of the stock, Lake's net assets had a fair value of $800 million. Its book value was $700 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value,...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE.
THANK YOU!
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On January 1, 2018, Cameron inc bought 10% of the outstanding common stock of Lake Construction Company for $170 million cash At the date of acquisition of the stock, Lake's net assets nad ฮ fair value of S700 milion. Their book value was S600 million The difference was attributable to the fair value of Lake's buildings and its land exceeding book value. each accounting for one-haif of the difference. Lake's net income for the year ended December 31, 2018, was...
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On January 1, 2021, Cameron Inc. bought 10% of the outstanding common stock of Lake Construction Company for $160 million cash, giving Cameron the ability to exercise significant influence over Lake's operations. At the date of acquisition of the stock, Lake's net assets had a fair value of $900 million. Its book value was $800 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference....
On January 1, 2018, Cameron Inc. bought 30% of the outstanding common stock of Lake Construction Company for $420 million cash. At the date of acquisition of the stock, Lake's net assets had a fair value of $800 million. Their book value was $700 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference. Lake's net income for the year ended December 31, 2018, was...
On January 1, 2021, Cameron Inc. bought 20% of the outstanding
common stock of Lake Construction Company for $260 million cash,
giving Cameron the ability to exercise significant influence over
Lake’s operations. At the date of acquisition of the stock, Lake's
net assets had a fair value of $900 million. Its book value was
$850 million. The difference was attributable to the fair value of
Lake's buildings and its land exceeding book value, each accounting
for one-half of the difference....
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE.
THANK YOU!
Exercise 12-22 (Algo) Equity method; adjustment for depreciation (L012-6, 12-7] Fizer Pharmaceutical paid $75 million on January 2, 2021, for 3 million shares of Carne Cosmetics common stock. The Investment represents a 30% Interest in the net assets of Carne and gave Fizer the ability to exercise significant influence over Carne's operations. Fizer received dividends of $1 per share on December 21, 2021, and Carne reported net Income...
On January 1, 2021, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $240 million cash, giving Cameron the ability to exercise significant influence over Lake's operations. At the date of acquisition of the stock, Lake's net assets had a fair value of $600 million. Its book value was $500 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference....
On January 1, 2021, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $240 million cash, giving Cameron the ability to exercise significant influence over Lake's operations. At the date of acquisition of the stock, Lake's net assets had a fair value of $600 million. Its book value was $500 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference....
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