Grand Lake Company acquired 40% of the voting shares of Granby Inc. on 1/1/16 for $1,500,000...

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Grand Lake Company acquired 40% of the voting shares of Granby Inc. on 1/1/16 for $1,500,000 in cash. This acquisition allowed Grand Lake to have the ability to significantly influence Granby. On 1/1/16, Granby had the following reported for assets and liabilities: Cash and AR Building (20 yr, useful life remaining) Copyright (5 yr. useful life remaining) Liabilities Purchase Price by Investor Less: Percentage of BV acquired (1,805,000*.4) Excess Payment over BV Less: Portion tied to Building (300,000*.4) Less: Portion tied to Copyright (250,000*.4) Excess Payment not identified Any excess is attributable to goodwill. For 2016, net income was $750,000 and dividends were $60,000. Prepare JEs for 2016. What are the balances for investment and equity in investee income? What amount is associated with goodwill from the acquisition? What is the return on investment? Description Initial investment Income Amortization Dividends Carrying Amount $55,000 $2,500,000 $50,000 (800,000) $1,500,000 $722,000 $778,000 $120,000 $100,000 $558,000 (GW) Account Investment in Granby Cash Investment in Gray Equity in Investee Income Equity in Investee Income Investment in Granby Cash Dividends Receivable Investment in Granby Dividends Receivable - Account Investment in Granby Equity in Investee Income Amortization: 120,000/20-6,000 Amortization: 100,000/5-20,000 Fair Value $55,000 $2,800,000 $300,000 (800,000) 274,000 Debit 1,500,000 300,000 26,000 24,000 12/31/16 1,750,000 24,000 Credit 1,500,000 300,000 26,000 24,000 24,000 Grand Lake Company acquired 40% of the voting shares of Granby Inc. on 1/1/16 for $1,500,000 in cash. This acquisition allowed Grand Lake to have the ability to significantly influence Granby. On 1/1/16, Granby had the following reported for assets and liabilities: Cash and AR Building (20 yr, useful life remaining) Copyright (5 yr. useful life remaining) Liabilities Purchase Price by Investor Less: Percentage of BV acquired (1,805,000*.4) Excess Payment over BV Less: Portion tied to Building (300,000*.4) Less: Portion tied to Copyright (250,000*.4) Excess Payment not identified Any excess is attributable to goodwill. For 2016, net income was $750,000 and dividends were $60,000. Prepare JEs for 2016. What are the balances for investment and equity in investee income? What amount is associated with goodwill from the acquisition? What is the return on investment? Description Initial investment Income Amortization Dividends Carrying Amount $55,000 $2,500,000 $50,000 (800,000) $1,500,000 $722,000 $778,000 $120,000 $100,000 $558,000 (GW) Account Investment in Granby Cash Investment in Gray Equity in Investee Income Equity in Investee Income Investment in Granby Cash Dividends Receivable Investment in Granby Dividends Receivable - Account Investment in Granby Equity in Investee Income Amortization: 120,000/20-6,000 Amortization: 100,000/5-20,000 Fair Value $55,000 $2,800,000 $300,000 (800,000) 274,000 Debit 1,500,000 300,000 26,000 24,000 12/31/16 1,750,000 24,000 Credit 1,500,000 300,000 26,000 24,000 24,000

Answer rating: 100% (QA)

Here are the journal entries for 2016 Initial investmentDebit Investment in Granby 1500000Credit Cas... View the full answer