Question

On January 1, Year 4, Cat Corporation purchased common shares of Mouse Limited for $2,000,000. On that date the net assets of Mouse had carrying value of $6,000,000 and all of the individual assets of Mouse had fair values that were equal to their carrying values except for Fair Value $1,000,000 Book value 500,000 Machine (remaining life of 5 years) The following relates to Mouse since the acquisition date: Year 4 Net Income S 220,000 190,000 Dividends paid $170,000 180,000 In Year 5, there was a goodwill impairment loss equal to 10% of the goodwill created at acquisition date. On January 15, Year 6, because of negative market indicators, Cat's investment in Mouse was tested for impairment and it was determined that the recoverable amount was $1,500,000 Required: Prepare all the journal entries that Cat should make regarding this investment in Mouse for Years 4, 5 and on January 15, Year 6 assuming the following two independent cases: a) Cat owns 30% of common shares of Mouse (13 marks) b) Cat owns 30% of common shares of Mouse. There is only one other shareholder who owns 70% of the Mouse common shares. (5 marks) Round to the nearest dollar. Show all work and schedules

Answer 1

od pud dhate un fain value net 0,60,000 (opo 0oo ニ2000,000-0 ct owns more than 2o e auuming that thiu るtake would gusoit in agnireant influence the invut many would be accounted per eain equauity methodl rood u wil not be uoied seate i euty muthod f aeorutirg 0O tur

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Account tla bebit ru 57ooD Tnvutment in mowe d ,o To income earne tom mowe 570o0 !,90/000 x 30 bng inom earned ham mose 1id tauh ale S1,000 Jo investment in moue ltd С 1,8О,000X30 bung divi dund tuind mouse ltd Not: In a invuutmunt in akouate unpairntnot ecedd . ament u ООС mpau d onl 나 tr eara ta cut unit leu el notat- J vvurral entruy writ. Tmpairmnt to be ood iu lvel ence no

uSec ment ol good w, u in anuuauy 15, yea 2000, 000 57,00D $20, 18/oo Revoverable amou15,0o ooo $ 5,IS,000 Debut Jo invetment un mowe Doo l tel (bing injasiounf stecopaiet eirg mouue tel

b) lat owns 30ソくharus ok moure and thou. u only one hare hotan who owns the balane 7oy sheseh olding dlote not nuecmary pudude tat to ience n it diei sion making the auaunting Unles and othwcoike pond Cat Continu to caruse digniprant inHuena, hene the investment wil be tsuatid as invet munt in an auovali