Question
On January 1, Year 4, Hidden Company acquired 25,000 ordinary shares of Jovano Company for $144,000 when the shareholders equity of Jovano was as follows:
On January 1, Year 4, Hidden Company acquired 25,000 ordinary shares of Jovano Company for $144,000 when the shareholders equity of Jovano was as follows:
Ordinary shares (100,000 no par value shares issued and outstanding) | $ | 200,000 |
Retained earnings | 327,000 | |
$ | 527,000 | |
In addition, Hidden purchased 20,000 shares in Jovano for $122,280 on January 1, Year 5, and 10,000 shares in Jovano for $63,360 on January 1, Year 6.
The following are the statements of retained earnings for Jovano from Year 4 to Year 6:
Year 4 | Year 5 | Year 6 | |||||||
Retained earnings, beginning of year | $ | 327,000 | $ | 360,000 | $ | 394,000 | |||
Profit | 53,000 | 55,000 | 59,000 | ||||||
Dividends | (20,000 | ) | (21,000 | ) | (22,000 | ) | |||
Retained earnings, end of year | $ | 360,000 | $ | 394,000 | $ | 431,000 | |||
Additional Information
- Jovanos ordinary shares are publicly traded. The market value of the shares at the close on December 31 of one year was the same as the market value on January 1 of the next year.
- Any acquisition differential is allocated to customer lists with a useful life of three years on each of the three acquisition dates. Neither company has any customer lists recorded on their separate entity records.
- There were no unrealized profits from intercompany transactions since the date of acquisition.
Required:
(a) Under the Equity method
Record amortization of acquisition differential in the books of Hidden Company Year 4, 5 and 6.
Record remeasurement gain or loss under the equity method in the books of Hidden Company in Year 6.
please show your work.
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