On January 1, 2020, Jordan Inc. purchased 25% of the outstanding common stock of Melody Corporation at a cost of $450,000. Melody Corporation had 400,000 shares of common stock outstanding.At the date of purchase, the book value of Melody's net assets was $1,500,000.Book value and fair value of net assets were the same for all balance sheet items except for machinery and inventory.The fair value exceeded the book value by $100,000 for machinery and $20,000 for the Inventory.<\/p>
The estimated useful life of machinery is 10 years and all inventory acquired was sold during 2020.Both companies have a January through December fiscal year. Melody Corporation reported net income of $200,000 and paid cash dividend of $50,000 during 2020.Market value of Melody Corporation was $6 per share at December 31, 2020.<\/p>
<\/p>
REQUIRED<\/strong><\/p> (1.) Prepare the entry to record the original investment in Mountain.<\/p> <\/p> (2.) Compute the amount of goodwill (if any) on the acquisition.<\/p> <\/p> (3.) Prepare the necessary entries (other than acquisition) for 2020.<\/p> <\/p> (4.) Assume that on January 10, 2020 Jordan Inc. sold 40% of its investment in MelodyCorporation for $220,000.Prepare the journal entry to record the sale of investment.<\/p> <\/p> (5). Assume that subsequent to selling 40% of the investment, Melody Corporation reported income of $250,000 and paid dividend of $40,000 for 2021.Market value of Melody Corporation's common stock was $5 per share at December 31, 2021.Prepare the journal entries (if any) for Jordan Inc. for its investment in Melody Corporation for 2021.<\/p>",
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"edition": "6th edition",
"authors": "J. Chris Leach, Ronald W. Melicher",
"cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/1482.jpg",
"uri": "\/textbooks\/entrepreneurial-finance-6th-edition-1482",
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"edition": "2nd Edition"
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"question_posted": "2024-06-28 05:39:30",
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