3. On 1/1/2015, Choco paid $92,000 to acquire 10% of the voting common stock of Cookie. In

1/1/2016, Choco acquired additional 20% of the voting common stock of Cookie for $210,000.

Following is the financial information about Cookie.

Book value of net assets 1/1/2015

$800,000

Net income (2015)

Net income (2016)

$180,000

$210,000

Dividends (2015)

Dividends (2016)

$80,000

$100,000

Land undervalued 12/31/2015

Land undervalued 12/31/2016

$60,000

$70,000

All excess payment will be recorded using Trademark which has useful life of 9 years in 2016.

During the year, there was no fair market value adjustment for Cookie.

Q1: In 2015, what method should be used to record this investment?

Q2: What is the balance of the investment account in Cookie at 12/31/2015?

Q3: What is the journal entry to record for dividends paid by Cookie at 12/31/2015?

Q4: In 2016, after additional 20% acquisition of Cookie, what method should be used to record

this investment for 2015 and 2016?

Q5: Calculate trademark in 2015 that will be recorded in 2016(if any).

Q6: Calculate annual amortization of under/overvalued asset and Trademark in 2015.

Q7: In 2016, what is the balance of the investment account in Cookie at 12/31/2015 using the

equity method?

Q8: Calculate trademark in 2016 that will be recorded in 2016(if any).

Q9: Calculate annual amortization of under/overvalued asset and Trademark in 2016.

Q10: In 2016, what is the balance of the investment account in Cookie at 12/31/2016 using the

equity method?