on 3 (9 marks) On January 1, 2022, XYZ Company purchased 2,500 of the 10,000 outstanding...

Transcribed Image Text:

on 3 (9 marks) On January 1, 2022, XYZ Company purchased 2,500 of the 10,000 outstanding common shares of ABC Computer Corp for $60,000 cash. XYZ had significant influence as a result of the investment and will use the equity method to account for the investment. On January 1, 2022, the assets of ABC were $350,000, liabilities were $200,000, and equity $150,000. Book values reflect fair values except for $100,000 of equipment, which has a five-year life and a fair value of $120,000. In 2022, ABC pays $10,000 of dividends and reports earnings of $75,000. Required: 1) Calculate goodwill on acquisition, and the annual extra depreciation on investee equipment at fair value. 2) Prepare 2022 journal entries for XYZ Company Date General Journal Account Titles and Explanation Debit Credit on 3 (9 marks) On January 1, 2022, XYZ Company purchased 2,500 of the 10,000 outstanding common shares of ABC Computer Corp for $60,000 cash. XYZ had significant influence as a result of the investment and will use the equity method to account for the investment. On January 1, 2022, the assets of ABC were $350,000, liabilities were $200,000, and equity $150,000. Book values reflect fair values except for $100,000 of equipment, which has a five-year life and a fair value of $120,000. In 2022, ABC pays $10,000 of dividends and reports earnings of $75,000. Required: 1) Calculate goodwill on acquisition, and the annual extra depreciation on investee equipment at fair value. 2) Prepare 2022 journal entries for XYZ Company Date General Journal Account Titles and Explanation Debit Credit