On January 1, Year 4, Hidden Company acquired 25,000 ordinary shares of Jovano Company for $142,400...

Transcribed Image Text:

On January 1, Year 4, Hidden Company acquired 25,000 ordinary shares of Jovano Company for $142,400 when the shareholders' equity of Jovano was as follows: Ordinary shares (100,000 no par value shares issued and outstanding) Retained earnings $200,000 300,000 $500,000 In addition, Hidden purchased 20,000 shares in Jovano for $121,600 on January 1, Year 5, and 10,000 shares in Jovano for $63,000 on January 1, Year 6. The following are the statements of retained earnings for Jovano from Year 4 to Year 6: Retained earnings, beginning of year Profit Dividends Retained earnings, end of year Year 4 $300,000 50,000 (20,000) $330,000 Year 5 $330,000 52,000 (21,000) $361,000 Year 6 $361,000 56,000 (22,000) $395,000 Additional Information Jovano's ordinary shares are publicly traded. The market value of the shares at the close on December 31 of one year was the same as the market value on January 1 of the next year. (i) cost method (ii) equity method Any acquisition differential is allocated to customer lists with a useful life of three years on each of the three acquisition dates. Neither company has any customer lists recorded on their separate- entity records. There were no unrealized profits from intercompany transactions since the date of acquisition. Required (a) For each of Years 4 to 6, prepare the journal entries that Hidden would use to account for its investment in Jovano under the (b) Calculate the balance in Hidden's investment in Jovano account at the end of Year 4, 5, and 6 under the (i) cost method (ii) equity method On January 1, Year 4, Hidden Company acquired 25,000 ordinary shares of Jovano Company for $142,400 when the shareholders' equity of Jovano was as follows: Ordinary shares (100,000 no par value shares issued and outstanding) Retained earnings $200,000 300,000 $500,000 In addition, Hidden purchased 20,000 shares in Jovano for $121,600 on January 1, Year 5, and 10,000 shares in Jovano for $63,000 on January 1, Year 6. The following are the statements of retained earnings for Jovano from Year 4 to Year 6: Retained earnings, beginning of year Profit Dividends Retained earnings, end of year Year 4 $300,000 50,000 (20,000) $330,000 Year 5 $330,000 52,000 (21,000) $361,000 Year 6 $361,000 56,000 (22,000) $395,000 Additional Information Jovano's ordinary shares are publicly traded. The market value of the shares at the close on December 31 of one year was the same as the market value on January 1 of the next year. (i) cost method (ii) equity method Any acquisition differential is allocated to customer lists with a useful life of three years on each of the three acquisition dates. Neither company has any customer lists recorded on their separate- entity records. There were no unrealized profits from intercompany transactions since the date of acquisition. Required (a) For each of Years 4 to 6, prepare the journal entries that Hidden would use to account for its investment in Jovano under the (b) Calculate the balance in Hidden's investment in Jovano account at the end of Year 4, 5, and 6 under the (i) cost method (ii) equity method