Cost method consolidation entries (controlling investment in affiliate, fair value differs from book value) Assume...
90.2K
Verified Solution
Link Copied!
Question
Accounting
Cost method consolidation entries (controlling investment in affiliate, fair value differs from book value)
Assume on January 1, 2020, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investees identifiable net assets had fair values that approximated their historical book values, except for tangible fixed assets, which had fair value that was $100,800 higher than the investees recorded book value. The tangible fixed assets had a remaining useful life of 6 years. In addition, the acquisition resulted in goodwill in the amount of $196,000 recognized in the consolidated financial statements of the investor company. Assume that, during the current year, the subsidiary reported net income of $85,120 and paid dividends of $35,840.
Assuming that the investor company uses the cost method to account for its investment in the investee, what is the amount of the debit in the [C] entry necessary to prepare the consolidated financial statements for the year ended December 31, 2022?
Select one:
a. $85,120
b. $49,280
c. $68,320
d. $35,840
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
