Hi, Ishu123.. I need both of the questions answered. This is the second part. Thank you so very much. Problem 30 On July 1, 2011, Gibson Company acquired 75,000 of the outstanding shares of Miller Company for $12 per share. This acquisition gave Gibson a 35 percent ownership of Miller and allowed Gibson to significantly influence the investee?s decisions. As of July 1, 2011, the investee had assets with a book value of $2 million and liabilities of $400,000. At the time, Miller held equipment appraised at $150,000 above book value; it was considered to have a seven?year remaining life with no salvage value. Miller also held a copyright with a five?year remaining life on its books that was undervalued by $650,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight?line method. Gibson applies the equity method for its investment in Miller. Miller?s policy is to pay a $1 per share cash dividend every April 1 and October 1. Miller?s income, earned evenly throughout each year, was $550,000 in 2011, $575,000 in 2012, and $620,000 in 2013. In addition, Gibson sold inventory costing $90,000 to Miller for $150,000 during 2012. Miller resold $80,000 of this inventory during 2012 and the remaining $70,000 during 2013. a. Prepare a schedule computing the equity income to be recognized by Gibson during each of these years. b. Compute Gibson?s investment in Miller Company?s balance as of December 31, 2013.

Hobson acquired 40% of Stokes voting stock for $210,000. During that time, Stokes has net assets of $400,000. 1.The first step is to compute for the amount of investment: Net asset of Stokes x 40% ownership = $400,000*.40 = $160,000 2. The next step is to calculate the difference between the acquisition price and book value of the purchase: Acquisition price $210,000 Percentage of book value 160,000 ($400,000*.40) Excess of acquisition price over book value $ 50,000 3. The excess of acquisition price over book value is identified to undervalue of building of $40,000 and royalty of $85,000. We have to multiply these amounts by the percentage of ownership as follows: Building ($40,000*.40) $ 16,000 Royalty ($85,000 *.40) 34,000 Excess of acquisition price over book value $ 50,000 4. Then compute for the annual amortization of fixed assets as follows: Cost divided by the life of the assets Cost Life Annual years Amortization Building ($40,000*.40) $ 16,000 10 $1,600 Royalty ($85,000 *.40) 34,000 20 1,700 Total annual amortization $3,300 5. Compute for the deferral of unrealized gain for 2012 on unsold inventory. Stokes sold $60,000 to Hobson during 2012 at a price of $90,000. Unsold inventory in Hobson's books is $15,000. Inventory, remaining end of year $15,000 Gross profit percentage Gross profit remaining inventory Ownership percentage .33% 60,000/90000 $5,000 .34 Unrealized gain to be deferred in 2012 $2,000 Respond