e except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $30 million for the plant facilities.
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Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2021, for $540 million.
At the date of purchase, the book value of Vancouver's net assets was $845 million. The book values and fair values for all
The estimated useful life of the plant facilities is 15 years. All inventory acquired was sold during 2021.
Vancouver reported net income of $160 million for the year ended December 31, 2021. Vancouver paid a cash dividend of $50 million.
Required:
1. Prepare all appropriate
2. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2021?
3. What amount should Northwest report in its balance sheet as its investment in Vancouver?
4. What should Northwest report in its statement of cash flows regarding its investment in Vancouver?
The journal entries are given as,
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- Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2021, for $400 million. At the date of purchase, the book value of Vancouver’s net assets was $775 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $20 million for the plant facilities. The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2021. Vancouver reported net income of $140 million for the year ended December 31, 2021. Vancouver paid a cash dividend of $30 million.Required:1. Prepare all appropriate journal entries related to the investment during 2021.2. What amount should Northwest report as its income from its investment in Vancouver for the…Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2016, for $400 million. At the date of purchase, the book value of Vancouver’s net assets was $775 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $20 million for the plant facilities. The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2016. Vancouver reported net income of $140 million for the year ended December 31, 2016. Vancouver paid a cash dividend of $30 million. Required: 1. Prepare all appropriate journal entries related to the investment during 2016. 2. What amount should Northwest report as its income from its investment in Vancouver for…Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold inCanada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber andMilling, Inc., on January 2, 2018, for $400 million.At the date of purchase, the book value of Vancouver’s net assets was $775 million. The book values and fairvalues for all balance sheet items were the same except for inventory and plant facilities. The fair value exceededbook value by $5 million for the inventory and by $20 million for the plant facilities.The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2018.Vancouver reported net income of $140 million for the year ended December 31, 2018. Vancouver paid acash dividend of $30 million.Required:1. Prepare all appropriate journal entries related to the investment during 2018.2. What amount should Northwest report as its income from its investment in Vancouver for the year…
- Par Corporation, a Canadian company, purchased 80% of the outstanding shares of Sub Company of Germany on December 31, Year 5 for €3,000,000 Euros. At that date, the carrying values of Sub’s assets and liabilities were equal to fair values. There was a goodwill impairment loss in Year 6 of €10,000. The fiscal Year 5 financial statements of Sub were as follows: Sub Company Balance Sheet December 31, Year 5 Cash € 500,000 Accounts receivable 900,000 Inventory 1,200,000 Capital assets (net) 3,250,000 € 5,850,000 Accounts payable € 650,000 Bonds payable 1,700,000 Common shares 2,000,000 Retained earnings 1,500,000 € 5,850,000 Par anticipated that there would be a high volume of intercompany transactions with Sub, because Par provides the raw materials to Sub and sales are global. Also Sub obtained most of its financing thru banks in Canada. Par uses the cost method to account for its investment in Sub. The fiscal Year 6 financial statements of Par and Sub were as follows: Balance Sheets…Norfolk Company, a broadcasting media in Hampton Roads, was seeking to gain a expansion in Virginia Beach. Toward that end, the company bought 10% of the outstanding common shares of Virginia Beach Magazine, Inc., on January 1, 2021, for $600,000.At the date of purchase, the book value of Virginia Beach's net assets was $5,000,000. The book values and fair values for all balance sheet items were the same except for land and building. The fair value exceeded book value by $200,000 for the land and by 800,000 million for the building.The estimated useful life of the building is 40 years. Virginia Beach Magazine reported net income of $ 240,000 for the year ended December 31, 2021. Virginia Beach Magazine paid a cash dividend of in total $80,000. According to the news posted on Wall Street Journal, Virginia Beach Magazine, Inc., was worthy as much as $6,100,000 (fair value) in the market on December 31, 2021. Required: Based on the information above, what method (equity, fair value, or…On December 31, Phoenix Corporation acquired all of Sedona Corporation’s voting stock in exchange for $560,000 cash. At the acquisition date, the fair values of Sedona’s assets and liabilities equaled their carrying values, except that the fair value of the inventory was $20,000 lower than the carrying value, the fair value of the equipment was $50,000 higher than the carrying value, and the fair value of the long-term debt was $4,000 lower than the carrying value. The separate condensed balance sheets of the two companies immediately after the acquisition (on 12/31) are as follows: Phoenix Sedona Cash $ 90,000 $ 60,000 Accounts receivable 130,000 25,000 Inventory 160,000 70,000 Plant and equipment (net)…
- At the beginning of the current year, Boyet Company bought 40% of Aubrey Company’s outstanding ordinary shares for P3,500,000. The company also paid P700,000 to a business broker who helped find a suitable business and negotiated the purchase. The carrying amount of Aubrey Company’s net assets at the purchase date totaled P9,000,000. The difference was attributed to plant which had a carrying amount of P1,100,000 and a fair value of P2,000,000 and to inventory which had a carrying amount of P250,000 and a fair value of P350,000. The plant has 18-year life. All inventory was sold during the current year. During the current year, the investee reported net income of P1,200,000 and paid a P200,000 cash dividend. Of the amount paid for the investment, how much is attributable to goodwill? How much is the amortization of purchase differential during the current year? What amount should be reported as investment income for the current year? What is the carrying amount of the investment in…Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 72,000 pounds. The subsidiary immediately borrowed 170,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 242,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,300 pounds per month. By year-end, rent payments totaling 83,000 pounds had been received, and 16,600 pounds was in accounts receivable. On October 1, 2020, 3,000 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,850 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…Panda Corporation, a U.S. company, formed a British subsidiary on January 1, 2014 by investing 450,000 British pounds (£) in exchange for all of the subsidiary's no-par common stock. The British subsidiary, Sky Corporation, purchased real property on April 1, 2014 at a cost of £500,000, with £100,000 allocated to land and £400,000 allocated to a building. The building is depreciated over a 40-year estimated useful life on a straight-line basis with no salvage value. The British pound is Sky's functional currency and its reporting currency. The British economy does not have high rates of inflation. Exchange rates for the pound on various dates were:January 01, 2014 = 1£ = $1.60April 01, 2014 = 1£ = $1.61December 31, 2014 =1£= $1.682014 average rate= 1£ = $1.66 Required: Prepare Sky's:a. Translation working papers;b. Translated income statement; andc. Translated balance sheet.
- Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 69,000 pounds. The subsidiary immediately borrowed 146,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 215,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 4,200 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…On 1 July 2020, Lada Ltd (LL) acquired a 20 per cent interest in Hupmobile Ltd (HL) for a cash consideration of $40,000. Despite its small shareholding in HL, LL is considered to have significant influence over HL, since LL is able to appoint a director to HL’s Board of Directors, and HL is a major customer of LL. LL also provides management personnel to HL, and the two companies share technical information. On the date of the acquisition, the assets of HL were reported at fair value. The share capital and reserves of HL at the date of acquisition were: Share capital 50,000 Retained earnings 140,000 Total shareholders’ equity $190,000 Additional information For the year ending 30 June 2021, HL recorded an after-tax profit of $100,000, from which it paid a dividend of $50,000. For the year ending 30 June 2022, HL recorded an after-tax profit of $80,000, from which it paid a dividend of $60,000. On 30 June 2022, HL revalued its Land upwards by $10,000. Before this revaluation, the Land…Branson paid $540,800 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the subsidiary had a book value of $390,000 (common stock of $200,000 and retained earnings of $190,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $126,000 fair value. Any remaining excess fair value was considered goodwill. In negotiating the acquisition price, Branson also promised to pay Wolfpack’s former owners an additional $36,000 if Wolfpack’s income exceeded $140,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $25,200. On December 31, 2020, based on Wolfpack’s earnings to date, Branson increased the value of the contingency to $28,800. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Net Income Dividends Declared 2020 $…