Premier Inc. acquired a 42% interest in Jungle Vine Inc. (JV) for $86,000 cash on January 1,
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Question:
Premier Inc. acquired a 42% interest in Jungle Vine Inc. (JV) for $86,000 cash on January 1, 2017 when JV had retained earnings of $100,000. | |||||
On purchase of the shares of JV, the acquisition differential schedule relating to Premier’s share of JV was: | |||||
Equipment $10,000 | |||||
Goodwill $35,000 | |||||
$45,000 | |||||
Equipment was expected to last five more years from date of acquisition and is still owned at year end. | |||||
Goodwill was written down by $5,000 in 2018. | |||||
In 2019, Premier sold JV land, reporting a gain of $20,000. JV still has the land. In 2019, JV sold Premier inventory for $30,000 reporting a profit of $6,000. $15,000 of the inventory was still held by Premier at the end of 2019 and sold early in 2020. | |||||
In 2020, JV reported net income of $35,000 and declared and paid total dividends of $15,000. At December 31, 2020, JV had retained earnings of $160,000. | |||||
Premier uses the equity method to record the investment in JV. Tax rate is 25%. |
Required: Show and label all calculations. | ||||
a) Calculate the Investment in JV value on the balance sheet of Premier at December 31, 2020. |
b) Calculate the equity method income related to JV for 2020 reported by Premier. |
Related Book For
Accounting Principles
ISBN: 978-0470534793
10th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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