Question
(4 points) Krisp acquired 40% of the voting common shares of Baker on 01-01-18 at a total cost of $2,785,000. At the time of the
(4 points) Krisp acquired 40% of the voting common shares of Baker on 01-01-18 at a total cost of $2,785,000. At the time of the acquisition, the fair value of Bakers net assets was $6,962,500 while the book value of Bakers net assets was $6,337,500. The difference between Bakers fair value and book value of its net assets was due to the fair value of equipment that is higher than book value. The equipment has a 10-year remaining useful life. Both Krisp and Baker depreciate fixed assets using a straight-line method and both assume no salvage value. For the year ending 12-31-18, Baker reported $300,000 of net income and declared and paid $60,000 of cash dividends.
Prepare all of the entries that Krisp should make in 2018 relating to its investment in Baker.
As of 12-31-18, what is the amount Krips has in its investment account relating to its investment in Baker?
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