Accounting Bubble, Inc. acquires 15% of Riley Corporation on January 1, 2018, for $130,000 when the book value of Riley's net assets was $760,000. During 2018 Riley reported a net income of $150,000 and paid dividends of $32,000. Riley has land that is undervalued by $30,000 on January 1, 2018. On January 1, 2019, Bubble purchased an additional 30% of Riley for $280,000, giving Bubble the ability to significantly influence the operating policies of Riley. During 2019, Riley reported a net income of $180,000 and paid dividends of $32,000. Riley's land (Řiley has only one piece of land) was undervalued by $32,000 on January 1, 2019. Ány excess of cost over book value is attributable to Trademark which has a useful life of 8 years on January 1, 2018. During 2018 and 2019, there was no fair value adjustment for Riley (there were no changes in fair value). And during 2018 and 2019, there were no changes in net assets. 1) What is the balance of the investment account in Riley on December 31, 2018? 2) What journal entry does Bubble need to make December 31, 2018, regarding Riley's dividends? Accounts 3) In 2019, when Bubble acquired an additional 30% of Riley, Bubble needs to use the equity method retrospectively to record for investment in Riley. Calculate Trademark in 2018 that will be recorded in 2019 if any. Dr. Cr.
Accounting Bubble, Inc. acquires 15% of Riley Corporation on January 1, 2018, for $130,000 when the book value of Riley's net assets was $760,000. During 2018 Riley reported a net income of $150,000 and paid dividends of $32,000. Riley has land that is undervalued by $30,000 on January 1, 2018. On January 1, 2019, Bubble purchased an additional 30% of Riley for $280,000, giving Bubble the ability to significantly influence the operating policies of Riley. During 2019, Riley reported a net income of $180,000 and paid dividends of $32,000. Riley's land (Řiley has only one piece of land) was undervalued by $32,000 on January 1, 2019. Ány excess of cost over book value is attributable to Trademark which has a useful life of 8 years on January 1, 2018. During 2018 and 2019, there was no fair value adjustment for Riley (there were no changes in fair value). And during 2018 and 2019, there were no changes in net assets. 1) What is the balance of the investment account in Riley on December 31, 2018? 2) What journal entry does Bubble need to make December 31, 2018, regarding Riley's dividends? Accounts 3) In 2019, when Bubble acquired an additional 30% of Riley, Bubble needs to use the equity method retrospectively to record for investment in Riley. Calculate Trademark in 2018 that will be recorded in 2019 if any. Dr. Cr.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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Bubble, Inc. acquires 15% of Riley Corporation on January 1, 2018, for $130,000
when the book value of Riley's net assets was $760,000. During 2018 Riley
reported a net income of $150,000 and paid dividends of $32,000. Riley has land
that is undervalued by $30,000 on January 1, 2018. On January 1, 2019, Bubble
purchased an additional 30% of Riley for $280,000, giving Bubble the ability to
significantly influence the operating policies of Riley. During 2019, Riley reported
a net income of $180,000 and paid dividends of $32,000. Riley's land (Řiley has
only one piece of land) was undervalued by $32,000 on January 1, 2019. Ány
excess of cost over book value is attributable to Trademark which has a useful life
of 8 years on January 1, 2018. During 2018 and 2019, there was no fair value
adjustment for Riley (there were no changes in fair value). And during 2018 and
2019, there were no changes in net assets.
1) What is the balance of the investment account in Riley on December 31, 2018?
2) What journal entry does Bubble need to make December 31, 2018, regarding
Riley's dividends?
Accounts
3) In 2019, when Bubble acquired an additional 30% of Riley, Bubble needs to use
the equity method retrospectively to record for investment in Riley. Calculate
Trademark in 2018 that will be recorded in 2019 if any.
Dr.
Cr.
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