On January 1, 2018, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Companyfor $300 million cash. At the date of acquisition of the stock, Lake’s net assets had a fair value of $900 million.Their book value was $800 million. The difference was attributable to the fair value of Lake’s buildings and itsland exceeding book value, each accounting for one-half of the difference. Lake’s net income for the year endedDecember 31, 2018, was $150 million. During 2018, Lake declared and paid cash dividends of $30 million. Thebuildings have a remaining life of 10 years.Required:1. Prepare all appropriate journal entries related to the investment during 2018, assuming Cameron accounts forthis investment by the equity method.2. Determine the amounts to be reported by Cameron:a. As an investment in Cameron’s 2018 balance sheet
On January 1, 2018, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company
for $300 million cash. At the date of acquisition of the stock, Lake’s net assets had a fair value of $900 million.
Their book value was $800 million. The difference was attributable to the fair value of Lake’s buildings and its
land exceeding book value, each accounting for one-half of the difference. Lake’s net income for the year ended
December 31, 2018, was $150 million. During 2018, Lake declared and paid cash dividends of $30 million. The
buildings have a remaining life of 10 years.
Required:
1. Prepare all appropriate journal entries related to the investment during 2018, assuming Cameron accounts for
this investment by the equity method.
2. Determine the amounts to be reported by Cameron:
a. As an investment in Cameron’s 2018 balance sheet
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