Over a 4 year period the Yellow corporation purchased 100% of the outstanding voting shares of Green Co. The acquisition was made in a series of steps as follows...

Date % Purchase Price

January, Year 1 5% 5,000

January, Year 2 10% 12,000

January, Year 3   10% 15,000

January, Year 4 75% 200,000

Total 100% 232,000

Any excess of the purchase price over the net book value of the assets was attributed to goodwill.

The acquisition in Year 3 allowed Yellow to have significant influence over the operating policies of Green.

The acquisition in Year 4 gave Yellow control over Green.

Operating results, dividends paid and fair value of White for the 4 years were as follows:

Net Income Dividend Paid Fair Value

January Year 1 100,000

Year 1 25,000 15,000 120,000

Year 2 30,000 15,000 150,000

Year 3 40,000 20,000 170,000

Year 4 50,000 25,000 250,000

For each of the 4 years compute the amount of income that will be recorded on Yellow's Books related to its Investment in Green Co.

AND compute the balance in the "Investment in Green Co." account on Yellow's books on December 31 of each year.

Answer rating: 100% (QA)

Year1 Yellow acquire 5 in Green Co Fair Value 120000 5 Investment in shares 6000 Purchase price 5000 ... View the full answer