Question

d Assignment Chapter 12 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, 2021, for $540 million At the date of purchase, the book value of Vancouver's net assets was $845 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 $30 million for the plant facilities. The estimated useful life of the plant facilities is 15 years. All inventory acquired was sold during 2021 Vancouver reported net income of $160 million for the year ended December 31, 2021. Vancouver paid a cash dividend of $50 million. Required: 1. Prepare all appropriate journal entries related to the investment during 2021. 2. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2021? 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? Complete this question by entering your answers in the tabs below. Req1 Req 2 and 3 Reg 4 Prepare all appropriate journal entries related to the investment during 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place, (.e., 5,500,000 should be entered as 5.5)) View transaction list < Prev 3 of 3 Next

Answer 1

1)Journal Entries		($ in millions)
Date	Accounts Title and explanation	Debit	Credit
Jan.2 2021	Investment in Vancouver Shares	540
	Cash		540
	(To Record Purchase)
Dec.31 2021	Investment in Vancouver Shares ($160 M x 40%)	64
	Investment revenue		64
	(To Record Net Income)
Dec.31 2021	Cash (40% x $50 million)	20
	Investment in Vancouver Shares		20
	(To Record Dividends)
Dec.31 2021	Investment revenue ($5 million x 40%)	2
	Investment in Vancouver Shares		2
	(To record Inventory adjustment)
Dec.31 2021	Investment revenue ($30 million x 40%)/15 years	0.8
	Investment in Vancouver Shares		0.8
	(To record Depreciation adjustment)
b)
Investment Revenue = $64 - $2 - $.80	61.2	Million
c) Investment in Vancouver = $540+$64 - $20 - $2 - $.80	581.2	Million
d)
Operating Cash Flow	$20 Million	Inflow
Investing Cash Flow	$540 Million	Outflow