On January 1, Year 2, Cat Corporation purchased common shares of Mouse Limited for $1,900,000. On this
Question:
On January 1, Year 2, Cat Corporation purchased common shares of Mouse Limited for $1,900,000. On this date, the net assets of Mouse had a book value of $5,550,000. At acquisition, the identifiable assets and liabilities of Mouse had fair values that were equal to carrying amounts, except for: Fair Value Book value Equipment (remaining life of 5 years) $1,000,000 $ 600,000 The following relates to Mouse since the acquisition date: Year Net Income Dividends paid 2 $ 230,000 $ 180,000 3 210,000 190,000 In Year 3, there was a goodwill impairment loss equal to 10% of the goodwill created at acquisition date. On January 15, Year 4, the market value of 30% of Mouse common shares was $1,500,000 and this decline was considered permanent.
Required:
Prepare all the journal entries that Cat should make regarding this investment in Mouse for Years 2, 3 and on January 15, Year 4, assuming the following two independent cases:
a) Cat owns 30% of common shares of Mouse.
b) Cat owns 30% of common shares of Mouse. There is only one other shareholder who owns 70% of the Mouse common shares.
Introductory Financial Accounting for Business
ISBN: 978-1260299441
1st edition
Authors: Thomas Edmonds, Christopher Edmonds