On January 1, 2018, Enron Company purchased for cash 40 percent of Walt Company’s 450,000 shares of common stock for $1,800,000 when 40 percent of the equity in Walt’s net assets was $2,610,000. The payment in excess of book value was assigned to depreciable assets with a remaining life of six years. As a result of this transaction, Enron has the ability to control Walt’s operating and financial policies. Walt’s net income for the year ended December 31, 2018, was $900,000. During 2018, Walt paid $487,500 in dividends to its shareholders. What is the method, why, for consolidation and how much would be the income reported by Enron for its investment in Walt.
On January 1, 2018, Enron Company purchased for cash 40 percent of Walt Company’s 450,000 shares of common stock for $1,800,000 when 40 percent of the equity in Walt’s net assets was $2,610,000. The payment in excess of book value was assigned to depreciable assets with a remaining life of six years. As a result of this transaction, Enron has the ability to control Walt’s operating and financial policies. Walt’s net income for the year ended December 31, 2018, was $900,000. During 2018, Walt paid $487,500 in dividends to its shareholders. What is the method, why, for consolidation and how much would be the income reported by Enron for its investment in Walt.
Chapter7: Corporations: Reorganizations
Section: Chapter Questions
Problem 42P
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On January 1, 2018, Enron Company purchased for cash 40 percent of Walt Company’s 450,000 shares of common stock for $1,800,000 when 40 percent of the equity in Walt’s net assets was $2,610,000. The payment in excess of book value was assigned to
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