Marble Inc acquired 25% of New Metal Enterprise for $2,000,000 on January 1,2013

The fair value and book value of 25% of New Metal Enterprise net assets were $2,000,000 and $1,600,000 respectively on that date and the difference was attributable to undervalue plant assets that would depreciate over 10 years.

During 2013 New Metal Enterprise reported net income of $800,000 and paid dividends of $400,000

New Metal Enterprise had a total fair value of $10,00,000 as of December 31,2013

Marble on acquisition elected to use the Fair Value method to account for this investment

Required :

1) Prepare the journal entry to record the acquisition of this investment on January 1.

2) Prepare the journal entry or entries for rest of the year including and any end of year.

3) On Marble s balance Sheet at December 31, 2013, the investment account will have what  balance? 

4) On Marble s Income statement for year ended December 31, 2013 what will be reported on the Income Statement ( FS item and amount )

5) If Marble had used the equity method  the investment account balance at December 31,2013 amount?                              

Answer rating: 100% (QA)

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