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On January 1, 2021, Morey, Inc., exchanged $175,175 for 25 percent of Amsterdam Corporation. Morey appropriately applied the

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Answer #1

a.   Amsterdam fair value implied by price paid by Morey

      $637,000 ÷ 70% =                                                                                $910,000

b. Revaluation gain                                                                                                

      1/1 equity investment in Amsterdam (book value) A $175,175

      25% income for 1st 6 months (306,000-185000)x0.25x6/12 B = $15,125

      Investment book value at 6/30 C= (A+B) $ 190,300

      Fair value of investment (25% x 910,000) D $227,500

      Gain on revaluation to fair value ( D-C) $37,200

c.   Goodwill at 12/31

      Fair value of Amsterdam at 6/30 $910,000

      Book value at 6/30 (500,000+277,700 + [ (306,000-185,000)÷ 2]) $838,200

      Excess fair value                                                                                  $71,800

      Allocation to goodwill (no impairment) $71,800

d.   Noncontrolling interest                                                                                    

      5% fair value balance at 6/30 (910,000*5%)    $45,500

      5% Income from 6/30 to 12/31   (306,000-185,000)÷ 2*5% $3,025

      5% dividends (20,000*0.05) (1,500)

      Noncontrolling interest 12/31 $47,025

If any doubts please mention in comment

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Answer #2

5% diviends = 20,000*.05 = 1,000 (not 1,500)



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