Dok Company acquired a 30 percent interest in Oak on January 1 for $2,000,000 cash. Assume the
Question:
Dok Company acquired a 30 percent interest in Oak on January 1 for $2,000,000 cash. Assume the cost of the investment equals the fair value of Oak’s net assets. Dok assigned the $500,000 fair value over book value of the interest acquired to the following assets:
Inventories $100,000 (sold in the current year)
Building $200,000 (4-year remaining life at January 1)
Goodwill $200,000
During the year Oak reported net income of $800,000 and paid $200,000 dividends.
REQUIRED
1. Determine Dok’s income from Oak.
2. Determine the December 31 balance of the Investment in Oak account.
Step by Step Answer:
Advanced Accounting
ISBN: 9780132568968
11th Edition
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith