Johannes Inc. acquired 80 percent of Corner Brook Ltd. common shares on January 1, Year 4, for $744,000. At that date, the fair value of the non-controlling Interest was $186,000. Corner Brook's balance sheet contained the following amounts at the time of the combination: Cash Accounts Receivable Inventory Construction Work in Progress Other Assets (net) Total Assets 66,000 140,000 Accounts Payable Bonds Payable 40,000 950,000 Common Shares ($10 par value) Retained Earnings 450,000 $1,646,000 Total Liabilities & Equities 106,000 610,000 400,000 530,000 $ 1,646,000 During each of the next three years, Corner Brook reported net income of $120,000 and paid dividends of $60,000. On January 1, Year 6, Johannes sold 8,800 of the Corner Brook shares for $260,000 in cash. Johannes used the equity method in accounting for its ownership of Corner Brook. Required: (a) Compute the balance in the Investment account reported by Johannes on January 1, Year 6, before its sale of shares. (Omit $ sign in your response.) Balance prior to sale of shares (b) Prepare the entry recorded by Johannes when it sold the Corner Brook shares. (If no entry is required for a transaction/event, select "No Journal entry required" In the first account field.)
Johannes Inc. acquired 80 percent of Corner Brook Ltd. common shares on January 1, Year 4, for $744,000. At that date, the fair value of the non-controlling Interest was $186,000. Corner Brook's balance sheet contained the following amounts at the time of the combination: Cash Accounts Receivable Inventory Construction Work in Progress Other Assets (net) Total Assets 66,000 140,000 Accounts Payable Bonds Payable 40,000 950,000 Common Shares ($10 par value) Retained Earnings 450,000 $1,646,000 Total Liabilities & Equities 106,000 610,000 400,000 530,000 $ 1,646,000 During each of the next three years, Corner Brook reported net income of $120,000 and paid dividends of $60,000. On January 1, Year 6, Johannes sold 8,800 of the Corner Brook shares for $260,000 in cash. Johannes used the equity method in accounting for its ownership of Corner Brook. Required: (a) Compute the balance in the Investment account reported by Johannes on January 1, Year 6, before its sale of shares. (Omit $ sign in your response.) Balance prior to sale of shares (b) Prepare the entry recorded by Johannes when it sold the Corner Brook shares. (If no entry is required for a transaction/event, select "No Journal entry required" In the first account field.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Johannes Inc. acquired 80 percent of Corner Brook Ltd. common shares on January 1, Year 4, for $744,000. At that date, the fair value
of the non-controlling Interest was $186,000. Corner Brook's balance sheet contained the following amounts at the time of the
combination:
Cash
Accounts Receivable
Inventory
Construction Work in Progress
Other Assets (net)
Total Assets
66,000
140,000
40,000
Accounts Payable
$ 106,000
Bonds Payable
610,000
950,000
Common Shares ($10 par value)
Retained Earnings
400,000
530,000
450,000
$1,646,000
$ 1,646,000 Total Liabilities & Equities
During each of the next three years, Corner Brook reported net income of $120,000 and paid dividends of $60,000. On January 1, Year
6, Johannes sold 8,800 of the Corner Brook shares for $260,000 in cash. Johannes used the equity method in accounting for its
ownership of Corner Brook.
Required:
(a) Compute the balance in the Investment account reported by Johannes on January 1, Year 6, before its sale of shares. (Omit $ sign
In your response.)
Balance prior to sale of shares
(b) Prepare the entry recorded by Johannes when it sold the Corner Brook shares. (If no entry is required for a transaction/event,
select "No journal entry required" In the first account field.)
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