On January 1, 2020, Chacha Holdings Ltd., a privately-held corporation that follows ASPE, purchased 35% of the common shares of Eugene Corp. for $600,000. With this purchase, Chacha now has significant influence over Eugene, who is a supplier of materials for Chacha’s production processes. Below is some information about the investee at the date the shares were purchased:

Required: Prepare all relevant entries for the investment based on the information provided above. Subsequently, the investee reported net income of $225,000 and dividends paid of $100,000. Assume that any excess of payment that is unexplained is attributed to goodwill.
Exercises 349

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Carrying value of assets subject to amortization Carrying value of assets not subject to amortization (10 years useful life remaining, on a straight-line basis) Fair value of the assets subject to amortization Liabilities $ 900,000 780,000 1,050,000 225,000