On January 1 of Year 1, Stratton Company purchased 5,000 shares of the 15,000 outstanding shares of
Question:
On January 1 of Year 1, Stratton Company purchased 5,000 shares of the 15,000 outstanding shares of Company B for a total of $82,000. At the time of the purchase, the book value of Company B’s equity was $202,000. Any excess of investment purchase price over the book value of Company B’s equity is attributable to a building owned by Company B. The building has a remaining useful life of 11 years. Company B’s net income in Year 1 was $72,000. Dividends per share paid by Company B were $1.65 in Year 1.
(1) Make all journal entries necessary on Stratton’s books to record its investment in Company B in Year 1.
(2) Compute the Year 1 ending balance in Stratton Company’s investment in Company B account.
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen