On January 1, 2021, Cameron Inc. bought 10% of the outstanding common stock of Lake Construction Company for $100 million cash, giving Cameron the ability to exercise significant influence over Lake's operations. At the date of acquisition of the stock, Lake's net assets had a fair value of $600 million. Its book value was $500 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, 2021, was $100 million. During 2021, Lake declared and paid cash dividends of $20 million. The buildings have a remaining life of 5 years. Required: 1. Complete the table below and prepare all appropriate journal entries related to the investment during 2021, assuming Cameron accounts for this investment by the equity method. 2. Determine the amounts to be reported by Cameron.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On January 1, 2021, Cameron Inc. bought 10% of the outstanding common stock of Lake Construction Company for $100 million cash,
giving Cameron the ability to exercise significant influence over Lake's operations. At the date of acquisition of the stock, Lake's net
assets had a fair value of $600 million. Its book value was $500 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, 2021, was $100 million. During 2021, Lake declared and paid cash dividends of $20 million. The buildings have a
remaining life of 5 years.
Required:
1. Complete the table below and prepare all appropriate journal entries related to the investment during 2021, assuming Cameron
accounts for this investment by the equity method.
2. Determine the amounts to be reported by Cameron.
Transcribed Image Text:On January 1, 2021, Cameron Inc. bought 10% of the outstanding common stock of Lake Construction Company for $100 million cash, giving Cameron the ability to exercise significant influence over Lake's operations. At the date of acquisition of the stock, Lake's net assets had a fair value of $600 million. Its book value was $500 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, 2021, was $100 million. During 2021, Lake declared and paid cash dividends of $20 million. The buildings have a remaining life of 5 years. Required: 1. Complete the table below and prepare all appropriate journal entries related to the investment during 2021, assuming Cameron accounts for this investment by the equity method. 2. Determine the amounts to be reported by Cameron.
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