Tugas Pertemuan 2 - Alya Sufi Ikrima - 041911333248

 

 Nama: Alya Sufi Ikrima  NIM: 041911333248 Kelas: A1-SP Tugas Pertemuan Kedua - Stock Investments-Investor Accounting and Reporting

a.  E2-3 Journal entries for investment under cost method On March 2, Klaus AG acquired 500 of Max AG’s 10,000 outstanding shares with a par value of $10 for $10,000 in cash. Klaus AG didn’t have any significant influence on Max AG in this transaction. On April 1, Max AG declared and paid dividends of $500,000. Klaus AG reported income of $1,000,000 at the end of the period.

Required: Prepare the necessary journal entries in Klaus AG’s book from the above information. Answer: March 2 April 1 Dec 31

Investment in Max AG’s  AG’s   Cash Cash (500/10,000 x $500,000) Dividend income No Journal

10,000 10,000 25,000 25,000

b.  E2-8 Calculate investment balance four years after acquisition Pam Corporation owns a 40 percent interest in the outstanding common stock of Sun Corporation, having acquired its interest for $2,400,000 on January 1, 2016, when Sun’s stockholders’ equity was $4,000,000. The fair value/book value differential was assigned to inventories that were undervalued by $100,000 and sold in 2016, to equipment with a four-year remaining life that was undervalued by $200,000, and to goodwill for the remainder. The  balance of Sun’s stockholders’ equity at December 31, 2019, is $5,500,000, and all changes therein are the result of income earned and dividends paid. Required: Determine the balance of Pam’s investment inve stment in Sun at December 31, 2019.

Answer: Investment in Sun

$2,400,000

BV of the interest acquires (40% x 4,000,000)

($1,600,000)

Total excess of cost over BV acquired

$800,000 

 

Assignment to identifiable Net Assets and Goodwill: The FV/BV differential

Interest acquired

Amount assigned

Inventories

100,000

40%

40,000

Equipment

200,000

40%

80,000

Goodwill for the remainder

$680,000

Excess FV over BV

$800,000 

Pam’s underlying equity in Sun  Sun  Goodwill

$2,200,000 680,000

Investment balance Dec 31,2019

$2,880,000 

c.  P2-1 Computations for interim purchase (investee has a discontinued operations loss) Kuma Corporation paid $600,000 in cash for a 40 percent interest in Sachi Corporation on Apr il il 1, 2016, when Sachi’s common stock was at $1,000,000 and the book value of its net assets equaled fair value. During 2016, Sachi declared and paid dividends of $30,000 each quarter on March 1, June 1, September 1, and December 1. Sachi’s net income in 2 016 was reported as follows: Income from continuing operations $250,000 Less: Loss of discontinued operations (50,000)  Net income $200,000

Required: Determine the following items for Kuma: 1. Goodwill or gains on the bargain purchase 2. Income from Sachi for 2016 3. Investment in Sachi account balance at December 31, 2016 4. Kuma’s equity in Sachi’s net assets at December 31, 2016  2016  5. The amount of discontinued operations loss that Kuma will show on December 31, 2016

 

Answer: 1.  Goodwill/gain from bargain purchase Cost investment 40% BV acquired  Net asset Dec 31 Income Dividends paid Mar 15 BV Apr 1 40% Goodwill

$600,000 $1,000,000 50,000 (30,000) $1,020,000

2.  Income from Sachi 2016 = 40% x $200,000 x 3.  Investment in Sachi at Dec 31, 2016 Cost investment 3

Sachi net income ($200,000 x  x 40%) 4

9

$480,000 $192,000  

 = $60,000 

12

$600,000 60,000

Dividends paid ($30,000 x 3 x 40%) (36,000) Investment $624,000 4.  Kuma’s equity  equity in Sachi’s net assets at Dec 31, 2016  2016  Total equity Dec 31 $1,000,000  Net income 2016 200,000 Dividends paid 2016 (120,000) Total equity Dec 31, 2016 $1,080,000 Investment interest 40% Equity in Sachi’s net assets Dec 31, 2016 $432,000 5.  The amount of discontinued operations loss that Kuma will show on Dec 31, 2016 Loss of discontinued operations $50,000 Percent owned 40% Discontinued operation loss $20,000