Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Quake Corporation paid $1,700,000 for a 30% interest in Tremor Corporations outstanding voting stock on January 1, 2011. The book values and fair values of

Quake Corporation paid $1,700,000 for a 30% interest in Tremor Corporations outstanding voting stock on January 1, 2011. The book values and fair values of Tremors assets and liabilities on January 1, along with additional information, are as follows (in thousands):

Book Value Fair Value

Cash $ 400 $ 400

Accounts receivable-net 700 700

Inventories (sold in 2011) 1,000 1,200

Other current assets 200 200

Land 900 1,700

Building-net (10-years remaining life) 1,500 2,000

Equipment-net (7-years remaining life) 1,200 500

Patent (5-years remaining life) ------- 300

Total Assets $5,900 $7,000

Accounts Payable $ 800 $ 800

Other current liabilities 200 200

Long term notes payable (due January 1, 2016) 1,000 1,100

Capital stock, $10 par 3,000

Retained earnings 900

Total $5,900

Tremor Corporation reported net income of $1,200,000 for 2011 and paid cash dividend of $600,000.

Required:

Prepare a schedule to allocate the investment fair values/ book value differentials relating to Quakes investment in Tremor.

Calculate Quakes net income from Tremor for 2011. (Please show detail of your calculation for adjusting this net income.

Show journal entries for all 2011 investment transactions in the book of Corporation.

Show the T account for investment in Tremor Corporation in the book of Quake Corporation.

Determine the balance of Quakes Investment in Tremor account at December 31, 2011.

Prepare a reconciliation statement to present the balance of this investment.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Global Financial Accounting And Reporting Principles And Analysis

Authors: Walter Aerts, Peter Walton

5th Edition

1473767121, 9781473767126

More Books

Students also viewed these Accounting questions

Question

3.1 Given A = 3E1, E3, E6, E94 , define A.

Answered: 1 week ago