Question
Marble Inc acquired 25% ofNew Metal Enterprise for $2,000,000 on January 1,2013 The fair value and book value of 25% of New Metal Enterprise net
Marble Inc acquired 25% ofNew Metal Enterprise for $2,000,000 on January 1,2013
The fair value and book value of 25% of New Metal Enterprise net assets were $2,000,000
and $1,600,000respectively on that date and the difference was attributable to undervalue
plant assets that would depreciate over 10 years.
During 2013 New Metal Enterprise reported net income of$ 800,000 and paid dividends of $400,000
New Metal Enterprise had a total fair value of $10,00,000 as of December 31,2013
Marble on acquisition elected to use the Fair Value method to account for this investment
1)Prepare the journal entry to record the acquisiton of this investment on January 1 ( 3 pts)
2)Prepare the journal entry or entries for rest of the year including and any end of year (9 pts)
3)On Marble s balance Sheet at December 31, 2013, the investment account will have whatbalance ? (6 pts)
4)On Marble s Income statement for year ended December31, 2013 what will be reported
on the Income Statement ( FS item and amount ) (6pts)
5)If Marble had used the equity methodthe investment account balance at December 31,2013 amount ?
(6 pts)
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