K8 fx 2 3 A 1 Question #5 Able acquired a 30% interest in Backer for B 4 At the date of acquisition the Assets and liabilities had a fair value equal to 5 the carrying amount except as indicated below 6 7 Inventory 8 Patent 9 10 The patent had an estimated remaining useful life of 10 years 11 12 Backer reported the following 13 14 15 Sales 16 17 Cost of sales 18 19 Gross Margin 20 21 22 23 24 Expenses Adminastrativre Selling Income before Taxes 25 26 Taxes 27 28 NeT income 30 D E F G H J K L M N $3,25,000 at Jan 1/20 $ 40,080 over carrying value $ 31,642 over carrying value 2020 2021 Retained earnings 2020 2021 3,60,000 3,95,000 01-Jan 2,15,000 1,98,000 2,40,000 2,55,000 Net Income 18,000 22,400 1,20,000 1,40,000 Less Dividends 35,000 5,000 47,000 48,000 55,000 60,000 1,02,000 1,08,000 31-Dec 1,98,000 2,15,400 18,000 32,000 5400 9600 12,600 22,400 P Q R S T U V W K8 13 A fx B C D E 2020 F 2021 G H J K L M N Retained earnings 14 15 Sales 16 17 Cost of sales 18 19 20 Expenses 21 Gross Margin Adminastrativre 22 Selling 23 24 Income before Taxes 25 26 Taxes 2020 2021 3,60,000 3,95,000 01-Jan 2,15,000 1,98,000 2,40,000 2,55,000 Net Income 18,000 22,400 1,20,000 1,40,000 Less Dividends 35,000 5,000 47,000 48,000 55,000 60,000 1,02,000 1,08,000 18,000 32,000 31-Dec 1,98,000 2,15,400 5400 9600 27 28 29 30 NeT income Able accounts for it's investment in Backer using the equity method 12,600 22,400 31 32 Required 33 34 35 Compute the balance of the Investment account as at Dec31, 2021 for Able Provide the journal entries for the amount of income Able would recognize each year 36 37 38 39 40 P R S T T U V W