On January 1, 2015, Standard Co. bought 40% of the outstanding common stock of Exchange Corp. for
Question:
On January 1, 2015, Standard Co. bought 40% of the outstanding common stock of Exchange Corp. for $380,000 cash. Standard Co. accounts for this investment by the equity method. At the date of acquisition of the stock, Exchange Corp.'s net assets had a carrying value of $630,000. Assets with an average remaining life of five years have a current fair value that is $160,000 in excess of their carrying values. The remaining difference between the purchase price and the value of the underlying stockholders' equity cannot be attributed to any identifiable tangible or intangible asset. Accordingly, the remaining difference is allocated to goodwill. At the end of 2015, Exchange Corp. reports net income of $210,000. During 2015, Exchange Corp. declared and paid cash dividends of $30,000.
Instructions:
Give the entries necessary to reflect Standard Co.'s investment in Exchange Corp. for 2015.
Common StockCommon stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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