Waters, Inc., acquired 10 percent of Denton Corporation on January 1, 2010, for $210,000 although Dentons book

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Waters, Inc., acquired 10 percent of Denton Corporation on January 1, 2010, for $210,000 although Denton’s book value on that date was $1,700,000. Denton held land that was undervalued by $100,000 on its accounting records. During 2010, Denton earned a net income of $240,000 while paying cash dividends of $90,000. On January 1, 2011, Waters purchased an additional 30 percent of Denton for $600,000. Denton’s land is still undervalued on that date, but then by $120,000. Any additional excess cost was attributable to a trademark with a 10-year life for the first purchase and a 9-year life for the second. The initial 10 percent investment had been maintained at cost because fair values were not readily available. The equity method will now be applied. During 2011, Denton reported income of $300,000 and distributed dividends of $110,000. Prepare all of the 2011 journal entries for Waters.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Advanced Accounting

ISBN: 978-0077431808

10th edition

Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik

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