On January 1, 2015, Titanic Corp. bought 30,000 shares of the available 100,000 common shares of Iceberg Inc., a publicly traded firm. This acquisition provided Titanic with significant influence. Titanic paid $700,000 cash for the investment. At the time of the acquisition, Iceberg reported assets of $2,500,000 and liabilities of $1,200,000. Asset values reflected fair market value, except for capital assets that had a net book value of $500,000 and a fair market value of $730,000. These assets had a remaining useful life of five years. For 2015 Iceberg reported net income of $400,000 and paid total cash dividends of $100,000.

On May 16, 2016, Titanic sold 15,000 of its shares in Iceberg for $425,000. Titanic has no immediate plans to sell its remaining investment in Iceberg.

Iceberg is actively traded, and stock price information follows:

January 1, 2015 $23

December 31, 2015 $25

January 1, 2016 $26

Instructions

a) Assuming Titanic is using ASPE, did the initial investment include a payment for goodwill? Provide support for your answer. (Page 514 & 515 of text).

b) At the end of 2015, what would appear on the income statement and balance sheet of Titanic in connection with its investment in Iceberg? Show supporting calculations.

c) Provide the entry to account for Titanics sale of the shares in May 2016. How should Titanic account for its remaining investment in Iceberg?