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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

  1. 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

  1. Was there any good will in this transaction? How much?
  2. Make the journal entries to reflect the above transactions by XYZ company during 2020
  3. 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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