Rohan Limited is a privately owned company and has December year-end. The company elected to apply ASPE for its financial reporting. On January 1, 2017, Rohan Limited purchased 30 shares of the 100 outstanding common shares of another privately held company, for 165,000 cash. Rohan Limited has significant influence as a result of this acquisition. At that date, the statement of financial position of Bassett Company reflected the following:

• Non- depreciable assets $155,400 (fair value, $199,000).
• Depreciable assets (net), $178,000 (fair value, $250,000); and
• Total Liabilities, $101,900 (book value equaled fair value);

The depreciable assets had remaining useful life of 5 years and had been depreciated using straight – line method. On December 31, 2017, Bassett Company reported net income of $88,400. Bassett Company also declared and paid cash dividend in the amount of $20,000 on December 31, 2017. Goodwill was not impaired over the time period in question.

Required:

1. How much goodwill is inherent in the purchase price?
2. Assuming equity method is used, please provide journal entries for the year 2017 which would be recorded by Rohan Limited with respect to its investment in Bassett Company.
3. Other than equity method, what other method is allowed under ASPE? Please also provide journal entries which will by recorded by Rohan Limited.

Answer rating: 100% (QA)

Step 1 Introduction Rohan Limited is a privately held corporation with a yearend of December For its ... View the full answer