Question
On July 1, 2021 Bentley Company paid $4,750,000 for 40% of Leroy Corporations 100,000 outstanding common shares. Information about the net assets of Leroy Corporation
| On July 1, 2021 Bentley Company paid $4,750,000 for 40% of Leroy Corporations 100,000 outstanding common shares. Information about the net assets of Leroy Corporation is shown in the table below. Leroy paid out $600,000 in dividends to its shareholders in October of 2021 and $200,000 in 2022. At December 31, 2021 Leroys publicly traded stock closed at $125 per share. On December 31, 2022 the stock closed at $114 per share. Leroy Corporation reported net income of $900,000 for 2021 and $1,000,000 for 2022. The average remaining useful life of Leroys depreciable assets was 10 years. Investee net assets | |
| Purchase price | $11,875,000 |
| Fair value (identifiable net assets) | 9,250,000 |
| Difference | $2,625,000 |
| Fair value (identifiable net assets) | $9,250,000 |
| Investee book value (identifiable net assets) | 7,250,000 |
| Difference | $2,000,000 |
Bentleys journal entries
1. Purchase on July 1, 2021
2. Receipt of dividends in October, each year
| 2021 | 2022 |
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Financial And Managerial Accounting For MBAs
Authors: Peter D. Easton
6th Edition
1618533592, 9781618533593
