Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold inCanada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber andMilling, Inc., on January 2, 2018, for $400 million.At the date of purchase, the book value of Vancouver’s net assets was $775 million. The book values and fairvalues for all balance sheet items were the same except for inventory and plant facilities. The fair value exceededbook value by $5 million for the inventory and by $20 million for the plant facilities.The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2018.Vancouver reported net income of $140 million for the year ended December 31, 2018. Vancouver paid acash dividend of $30 million.Required:1. Prepare all appropriate journal entries related to the investment during 2018.2. What amount should Northwest report as its income from its investment in Vancouver for the year endedDecember 31, 2018?3. What amount should Northwest report in its balance sheet as its investment in Vancouver?4. What should Northwest report in its statement of cash flows regarding its investment in Vancouver?
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in
Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and
Milling, Inc., on January 2, 2018, for $400 million.
At the date of purchase, the book value of Vancouver’s net assets was $775 million. The book values and fair
values for all
book value by $5 million for the inventory and by $20 million for the plant facilities.
The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2018.
Vancouver reported net income of $140 million for the year ended December 31, 2018. Vancouver paid a
cash dividend of $30 million.
Required:
1. Prepare all appropriate
2. What amount should Northwest report as its income from its investment in Vancouver for the year ended
December 31, 2018?
3. What amount should Northwest report in its balance sheet as its investment in Vancouver?
4. What should Northwest report in its statement of
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