Question

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Exercise 12-24 (Algo) Equity method, partial year (L012-6, 12-7] On July 1, 2021. Gupta Corporation bought 20% of the outstanding common stock of VB Company for $120 million cash giving Gupta the ability to exercise significant influence over VB's operations. At the date of acquisition of the stock, VB's net assets had a total fair value of $520 million and a book value of $300 million. Of the $220 million difference, $48 million was attributable to the appreciated value of Inventory that was sold during the last half of 2021. $150 million was attributable to buildings that had a remaining depreciable life of 15 years, and $22 million related to equipment that had a remaining depreciable life of 10 years. Between July 1.2021, and December 31, 2021, VB earned net Income of $45 million and declared and paid cash dividends of $40 million $300 milion Cations. At the non stock of VB Required: 1. Prepare all appropriate Journal entries related to the investment during 2021, assuming Gupta accounts for this Investment by the equity method. 2 Determine the amounts to be reported by Gupta. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare all appropriate journal entries related to the investment during 2021, assuming Gupta accounts for this investment by the equity method. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).) View transaction ist Journal entry worksheet Record the purchase of VB company shares for $120.0 million. Note: Enter debits before credits Transaction General Journal Debit Credit Record entry Clear entry View general Journal Required 1 Required 2 >

Answer 1

Investments in Associates A/c Dr 120

To Cash 120

(Being the purchase of VB company shares for $120million is recorded.)

Investments in Associates A/c Dr 9

To Investment revenue A/c 9

(Being share of gupta corporation in VB company net income is recorded)

Cash A/c Dr 8

To investments in Associates A/c 8

(Being the cash dividend of 20% shares are held)