Assume that on January 1, 2016 an investor company paid $5,800 to an investee company in exchange
Question:
Assume that on January 1, 2016 an investor company paid $5,800 to an investee company in exchange for the following assets and liabilities transferred from the investee company:
Asset (Liability) | Investee's Book Value | Estimated Fair Value |
---|---|---|
Production equipment | $600 | $520 |
Factory | 3,000 | 2,860 |
Land | 200 | 780 |
Patents | - | 1,300 |
Accrued liabilities | (240) | (260) |
In addition, assume that the investor paid an additional $200 of transaction costs to a third party. The book values are from the investee’s financial records immediately before the exchange. The fair values are measured in accordance with FASB ASC 820: Fair Value Measurement.
Parts a. and b. are independent of each other.
If no additional debit entries are required, select "No entry" as the answer.
a). Provide the journal entry recorded by the investor company assuming that the net assets transferred from the investee do not qualify as a “business,” as that term is defined in FASB ASC Master Glossary.
b). Provide the journal entry recorded by the investor company assuming that the net assets transferred from the investee qualify as a “business,” as that term is defined in FASB ASC Master Glossary.
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon