Question

Balance sheet, income, and dividend data for Amber Corporation, Blair Corporation, and Carmen Corporation at January 1, 20X3, were as follows:


On January 1, 20X3, Amber Corporation purchased 40 percent of the voting common stock of Blair Corporation by issuing common stock with a par value of $40,000 and fair value of $130,000. Immediately after this transaction, Blair purchased 25 percent of the voting common stock of Carmen Corporation by issuing bonds payable with a par value and market value of $51,500. On January 1, 20X3, the book values of Blair’s net assets were equal to their fair values except for equipment that had a fair value $30,000 more than book value and patents that had a fair value $25,000 more than book value. At that date, the equipment had a remaining economic life of eightyears, and the patents had a remaining economic life of five years. The book values of Carmen’s assets were equal to their fair values except for inventory that had a fair value $6,000 in excess of book value and was accounted for on a FIFO basis.

Required
a. Compute the net income reported by Amber Corporation for 20X3, assuming Amber and Blair used the equity method in accounting for their intercorporate investments.
b. Give all journal entries recorded by Amber relating to its investment in Blair during20X3.


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  • CreatedMay 23, 2014
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