On April 2, 20X4, Curry Ltd. acquired 40% of the outstanding common shares of Jasmine Ltd. by issuing one share of Curry plus $ 5 cash for each of Jasmine’s shares acquired. At the time of purchase, Curry’s shares were trading at $ 25 per share and Jasmine’s shares were trading at $ 28. Jasmine had a total of 1 million shares outstanding.
At the date of acquisition, the shareholders’ equity of Jasmine totaled $ 18,000,000. The fair values of Jasmine’s assets and liabilities were the same as their net carrying values, except for the following capital assets:

The building and equipment have estimated remaining useful lives of ten years and five years respectively. Jasmine uses straight- line amortization.
For the year ended March 31, 20X5, Jasmine reported net income of $ 1,500,000. Jasmine’s dividend payout was 60% for fiscal 20X5.

For the year ended March 31, 20X5, compute:
(1) Curry’s equity in the earnings of Jasmine.
(2) The balance of the investment account at the fiscal year- end, using the equity method. Provide supportingcalculations.

  • CreatedMarch 13, 2015
  • Files Included
Post your question