Following are selected account balances from Peregrine Company and Sprano Corporation as of December 31, 2021: On January 1, 2021, Peregrine acquired all of Sprano’s outstanding stock for $680,000 fair value in cash and common stock. At the date of acquisition, copyrights (with a 6-year remaining life) were undervalued by $120,000 (i.e., market value was higher than book value). Peregrine applies the equity method to maintain the Investment in Sprano account. As of December 31, 2021, what is the balance of Investment in Sprano reported in Peregrine’s book? Show the entries made to the Investment account during 2021.
Following are selected account balances from Peregrine Company and Sprano Corporation as of December 31, 2021: On January 1, 2021, Peregrine acquired all of Sprano’s outstanding stock for $680,000 fair value in cash and common stock. At the date of acquisition, copyrights (with a 6-year remaining life) were undervalued by $120,000 (i.e., market value was higher than book value). Peregrine applies the equity method to maintain the Investment in Sprano account. As of December 31, 2021, what is the balance of Investment in Sprano reported in Peregrine’s book? Show the entries made to the Investment account during 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Following are selected account balances from Peregrine Company and Sprano Corporation as of December 31, 2021:
On January 1, 2021, Peregrine acquired all of Sprano’s outstanding stock for $680,000 fair value in cash and common stock. At the date of acquisition, copyrights (with a 6-year remaining life) were undervalued by $120,000 (i.e., market value was higher than book value). Peregrine applies the equity method to maintain the Investment in Sprano account.
As of December 31, 2021, what is the balance of Investment in Sprano reported in Peregrine’s book? Show the entries made to the Investment account during 2021.
Transcribed Image Text:Peregrine
$ (700,000)
Sprano
(400,000)
Revenues
$
Cost of goods sold
250,000
100,000
Depreciation expense
150,000
200,000
Equity Income in Sprano
Retained earnings, 1/1/21
???
(600,000)
(200,000)
Dividends declared
80,000
60,000
Current assets
400,000
500,000
Copyrights
Royalty agreements
Investment in Sprano
900,000
400,000
600,000
1,000,000
???
Liabilities
Common Stock ($20 par)
Additional paid-in capital
(950,000)
(600,000)
(150,000)
(1,380,000)
(200,000)
(80,000)
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