Question
Step 1. On January 1, 2020, Pond Co. paid $160,000 to acquire10% of Ramp Co. Pond appropriately uses fair value method to account for its
Step 1. On January 1, 2020, Pond Co. paid $160,000 to acquire10% of Ramp Co. Pond appropriately uses fair value method to account for its investment in Ramp. During 2020, Ramp generated net income of $300,000, and declared and paid a cash dividend of $70,000 to its stockholders. The fair value of Ramps stocks is $2,000,000 on 12/31/2020. | ||||||||||||||||||||
Step 2. On January 1, 2021, Pond Co. acquired an additional 30% of Ramp Co. for $600,000, and gained significant influence over Ramp. On that date, Ramp reported assets and liabilities with book values of $2,530,000 and $700,000, respectively. A building owned by Ramp had an appraised value of $300,000, although it had a book value of only $180,000. This building had a 12-year remaining life. It was being depreciated on the straight-line basis. Ramps other assets and liabilities have fair values approximate to their book values. | ||||||||||||||||||||
Step 3. Ramp generated net income of $350,000 in 2021, and declared and paid a cash dividend of $90,000 to its stockholders. The fair value of Ramps stocks is $2,400,000 on 12/31/2021. | ||||||||||||||||||||
Step 4. In 2021, Ramp sold inventory to Pond for $180,000. This inventory had cost only $108,000. Pond resold $120,000 of the inventory during 2021 and the rest of $60,000 is expected to be sold during 2022. | ||||||||||||||||||||
| ||||||||||||||||||||
Prepare all of Pond Co.s journal entries for its investment in Ramp Co. for year of 2020 and 2021. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started