1. Perform the preliminary calculation to determine the excess of fair value over book value for the initial investment in Edison. 2 Prepare a schedule to assign the excess of cost over book value - see the slide titled "Cost/Book Value Assignment". 3. Prepare an Amortization schedule for the cost/book value differences similar to the one in the power point presentation. See the slide "Amortization and Investment Income".
1. Perform the preliminary calculation to determine the excess of fair value over book value for the initial investment in Edison. 2 Prepare a schedule to assign the excess of cost over book value - see the slide titled "Cost/Book Value Assignment". 3. Prepare an Amortization schedule for the cost/book value differences similar to the one in the power point presentation. See the slide "Amortization and Investment Income".
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
Related questions
Question
![Ford Corporation paid $1,700,000 for a 35% interest in Edison Corporation's outstanding voting stock on January 1, 2021. The book Values
and Fair Values of Edison's assets and Liabilities on January 1, along with amortization information are as follows (In thousands).
Book Value Fair Value
Difference
Cash
500
500
Account's receivables - net (received in current year)
750
770
20
Inventories (sold in 2021)
Other current assets
1000
1200
200
210
210
Land
1000
1500
500
Buildings - net (10 year remaining life)
Equipment - net (5 year remaining life)
Total Assets
1850
1950
100
1100
750
350
6410
6880
470
Accounts payable (paid in current year.)
Other current liabilities
850
860
10
180
180
Bond's payable (due December 1, 2026)
Capital stock, $10 par
Retained Earnings
Total Liabilities and S/E
1000
1250
250
3000
1380
6410
Edison corporation reported net income of $1,200,000 for 2021 and paid dividends of $275,000.
Required (prepare in thousands)
1. Perform the preliminary calculation to determine the excess of fair value over book value for the initial investment in Edison.
2 Prepare a schedule to assign the excess of cost over book value - see the slide titled "Cost/Book Value Assignment".
B. Prepare an Amortization schedule for the cost/book value differences similar to the one in the power point presentation. See the
slide "Amortization and Investment Income".
. Calculated the total Income from Edison for 2021.
. Calculate the balance in the "Investment in Edison" account at December 31, 2021.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F18c850a6-f8ec-493d-8bd6-ceaad19870bc%2Fb06a89da-e4af-40bc-85a3-8e8b023653aa%2Fw7v7huo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Ford Corporation paid $1,700,000 for a 35% interest in Edison Corporation's outstanding voting stock on January 1, 2021. The book Values
and Fair Values of Edison's assets and Liabilities on January 1, along with amortization information are as follows (In thousands).
Book Value Fair Value
Difference
Cash
500
500
Account's receivables - net (received in current year)
750
770
20
Inventories (sold in 2021)
Other current assets
1000
1200
200
210
210
Land
1000
1500
500
Buildings - net (10 year remaining life)
Equipment - net (5 year remaining life)
Total Assets
1850
1950
100
1100
750
350
6410
6880
470
Accounts payable (paid in current year.)
Other current liabilities
850
860
10
180
180
Bond's payable (due December 1, 2026)
Capital stock, $10 par
Retained Earnings
Total Liabilities and S/E
1000
1250
250
3000
1380
6410
Edison corporation reported net income of $1,200,000 for 2021 and paid dividends of $275,000.
Required (prepare in thousands)
1. Perform the preliminary calculation to determine the excess of fair value over book value for the initial investment in Edison.
2 Prepare a schedule to assign the excess of cost over book value - see the slide titled "Cost/Book Value Assignment".
B. Prepare an Amortization schedule for the cost/book value differences similar to the one in the power point presentation. See the
slide "Amortization and Investment Income".
. Calculated the total Income from Edison for 2021.
. Calculate the balance in the "Investment in Edison" account at December 31, 2021.
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