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On January 1, Year 3 JJ purchased 35% of the outstanding voting shares of BB Inc. for $250,000. BB's Balance Sheet on that date is
On January 1, Year 3 JJ purchased 35% of the outstanding voting shares of BB Inc. for $250,000. BB's Balance Sheet on that date is shown below: BB's carrying values equaled their fair market values on the acquisition date, with the exception of the equipment, which was had a fair market value of $320,000. The equipment had a remaining useful life of five years from the acquisition date. The equipment is being amortized on a straight-line basis. BB reported Net incomes of $55,000 and $65,000 for Year 3 and Year 4 respectively. BB also paid dividends of $20,000 and $24,000 for Year 3 and Year 4 respectively. In Year 4 there was a goodwill impairment loss equal to 10% of the good will created at acquisition date. Prepare the journal entries for Year 3 and Year 4. Prepare the journal entry, if necessary, if the market value of 35% of investment in BB was $190,000 at January 10, Year 5 and the drop was considered a permanent decline. If no journal entry is required, briefly explain why
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