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On March 1, 2020, the XYZ Company acquired 40% of the voting stock of KLM Company for 6 million. The net worth of KLM book
- On March 1, 2020, the XYZ Company acquired 40% of the voting stock of KLM Company for 6 million. The net worth of KLM book value is 10 million. The fair market value of the KLM assets and liabilities are equal except for a building with book value of 3 million has a fair value of 5 million.
KLM reported net income of 2 million and made dividend distributions of 1 million during the year ending 12/31/2020
Assuming XYZ is using the EQUITY METHOD for this investment
- Was there any good will in this transaction? How much?
- Make the journal entries to reflect the above transactions by XYZ company during 2020
- Assume XYZ uses straight line depreciation and 10 years economic life. Show the general ledger of Investment account and ending balance by XYZ company on 12/31/2020
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