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On January 1.2020, Twitter Company acquired 20 percent of the voting shares of Musk, Inc., for $3,300,000 in cash. Both companies provide commercial Internet support
On January 1.2020, Twitter Company acquired 20 percent of the voting shares of Musk, Inc., for $3,300,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Twitter made the investment to gain access to Musk's board of directors and thus facilitate future cooperative agreements between the two firms. Twitter quickly obtained several seats on Musk's board, which gave it the ability to significantly influence Musk's operating and investing activities. The January 1, 2020, carrying amounts and corresponding fair values for Musk's assets and liabilities follow: Also, as of January 1, 2020, Musk's computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a three-year remaining useful life. The trademark's useful life was considered indefinite. Twitter attributed to goodwill any unidentified excess cost. During the next two years, Musk reported the following net income and dividends: Instructions: 1. Prepare an acquisition date fair value analysis and compute the annual amortization (15 points) 2. Prepare Twitter's equity method journal entris for 2020 and 2021 (15 points) 3. Calculate the investment account balance and equity in investee's earnings for 2020 and 2021 (10 Points)
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