On July 1, 2021, Gupta Corporation bought 30% of the outstanding common stock of VB Company for $170 million cash, giving Gupta the ability to exercise significant influence over VB’s operations. At the date of acquisition of the stock, VB’s net assets had a total fair value of $490 million and a book value of $220 million. Of the $270 million difference, $50 million was attributable to the appreciated value of inventory that was sold during the last half of 2021, $160 million was attributable to buildings that had a remaining depreciable life of 10 years, and $60 million related to equipment that had a remaining depreciable life of 5 years. Between July 1, 2021, and December 31, 2021, VB earned net income of $60 million and declared and paid cash dividends of $50 million. Required: 1. Prepare all appropriate journal entries related to the investment during 2021, assuming Gupta accounts for this investment by the equity method. a. Record the purchase of VB company shares for $170.0 million. b.Record the Gupta Corporation share of VB company net income.
On July 1, 2021, Gupta Corporation bought 30% of the outstanding common stock of VB Company for $170 million cash, giving Gupta the ability to exercise significant influence over VB’s operations. At the date of acquisition of the stock, VB’s net assets had a total fair value of $490 million and a book value of $220 million. Of the $270 million difference, $50 million was attributable to the appreciated value of inventory that was sold during the last half of 2021, $160 million was attributable to buildings that had a remaining
Required:
1. Prepare all appropriate
a. Record the purchase of VB company shares for $170.0 million.
b.Record the Gupta Corporation share of VB company net income.
c.Record the cash dividend of 30% on shares held.
d.Record the amortization of the differential.
2. Determine the amounts to be reported by Gupta.
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