On January 2, 2011, Best Beverages acquired 45 percent of the stock of Better Bottlers for $30
Question:
On January 2, 2011, Best Beverages acquired 45 percent of the stock of Better Bottlers for $30 million in cash. Best Beverages accounts for its investment using the equity method. At the time of acquisition, Better Bottlers' balance sheet was as follows (in millions):
Better Bottlers Balance Sheet, January 2, 2011
Assets
Current assets................................................................................................................ $ 20
Property and equipment, net.................................................................................... 415
Patents and trademarks............................................................................................ 150
Total assets................................................................................................................... $585
Liabilities and equity
Current liabilities.......................................................................................................... $ 42
Long-term debt.............................................................................................................. 518
Total liabilities.......................................................................................................... .... 560
Capital stock..................................................................................................................... 12
Retained earnings............................ <....................................................................... 13
Total equity...................................................................................................................... 25
Total liabilities and equity......................................................................................... $585
Valuation of Better Bottlers' assets and liabilities revealed that its reported patents and trademarks (10-year life) had a fair value of $160 million and it had unrecognized brand names (15-year life) worth $9 million. Better Bottlers' December 31, 2014, retained earnings balance is $25 million. For 2014, it reported net income of $2.5 million and paid $650,000 in dividends
Required
a. Prepare the 2014 entries to report the above information on Best Beverages' books.
b. Calculate the Investment in Better Bottlers balance, reported on Best Beverages' December 31, 2014 balance sheet.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III