On 1/1/2020, Company XX purchased 30% of the common shares of Company YY for $ 150,000 cash. On that date, Company YY had stockholders' equity of $ 250,000. On 1/1/2020 Company YY had the following: a- Overvalued inventory by $ 30,000 (all sold in 2020) [Overvalued means that BV is larger than FV] b- Unrecorded copyright valued at $ 120,000 (10 years expected useful life) In 2020, Company YY had net income $ 100,000 and did not pay dividends. Required a- Compute the goodwill for Company YY as on 1/1/2020 b- Record the journal entry for the investment on 1/1/2020 in Company ZZ books C- Record the journal entry on 31/12/2020 by Company XX for net income from YY d- Record the journal entry on 31/12/2020by Company XX for inventory adjustment e- Record the journal entry on 31/12/2020 by Company XX for copyright amortization adjustment

On 1/1/2020, Company XX purchased 30% of the common shares of Company YY for $ 150,000 cash. On that date, Company YY had stockholders' equity of $ 250,000. On 1/1/2020 Company YY had the following: a- Overvalued inventory by $ 30,000 (all sold in 2020) [Overvalued means that BV is larger than FV] b- Unrecorded copyright valued at $ 120,000 (10 years expected useful life) In 2020, Company YY had net income $ 100,000 and did not pay dividends. Required a- Compute the goodwill for Company YY as on 1/1/2020 b- Record the journal entry for the investment on 1/1/2020 in Company ZZ books C- Record the journal entry on 31/12/2020 by Company XX for net income from YY d- Record the journal entry on 31/12/2020by Company XX for inventory adjustment e- Record the journal entry on 31/12/2020 by Company XX for copyright amortization adjustment

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On 1/1/2020, Company XX purchased 30% of the common shares of Company YY for $ 150,000 cash. On that date, Company YY had
stockholders' equity of $ 250,000.
On 1/1/2020 Company YY had the following:
a- Overvalued inventory by $ 30,000 (all sold in 2020) [Overvalued means that BV is larger than FV]
b- Unrecorded copyright valued at $ 120,000 (10 years expected useful life)
In 2020, Company YY had net income $ 100,000 and did not pay dividends.
Required
a- Compute the goodwill for Company YY as on 1/1/2020
b- Record the journal entry for the investment on 1/1/2020 in Company ZZ books
C-
Record the journal entry on 31/12/2020 by Company XX for net income from YY
d- Record the journal entry on 31/12/2020by Company XX for inventory adjustment
e- Record the journal entry on 31/12/2020 by Company XX for copyright amortization adjustment

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