On July 1, 2024, Clearwater Incorporated purchased 8,000 shares of the outstanding common stock of Mountain Corporation at a cost of $160,000. Clearwater will have significant influence over the financial and operating policies of Mountain. Mountain had 40,000 shares of outstanding common stock. Assume the total book value and fair value of identifiable net assets is $750,000. Both companies have a January through December fiscal year. The following data pertains to Mountain Corporation during 2024: Dividends declared and paid, January 1-June 30 $ 13,000 Dividends declared and paid, July 1-December 31 $ 13,000 $ 15,000 $ 19,000 Net income, January 1-June 30 Net income, July 1-December 31 Required: 1. Prepare the entry to record the original investment in Mountain. 2. Compute the goodwill (if any) on the acquisition. 3. Prepare the necessary entries (other than acquisition) for 2024 under the equity method. Prepare the entry to record the original investment in Mountain. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Compute the goodwill (if any) on the acquisition. Record the entry for cash dividend received under the equity method. Record the entry for investment revenue under the equity method.
On July 1, 2024, Clearwater Incorporated purchased 8,000 shares of the outstanding common stock of Mountain Corporation at a cost of $160,000. Clearwater will have significant influence over the financial and operating policies of Mountain. Mountain had 40,000 shares of outstanding common stock. Assume the total book value and fair value of identifiable net assets is $750,000. Both companies have a January through December fiscal year. The following data pertains to Mountain Corporation during 2024: Dividends declared and paid, January 1-June 30 $ 13,000 Dividends declared and paid, July 1-December 31 $ 13,000 $ 15,000 $ 19,000 Net income, January 1-June 30 Net income, July 1-December 31 Required: 1. Prepare the entry to record the original investment in Mountain. 2. Compute the goodwill (if any) on the acquisition. 3. Prepare the necessary entries (other than acquisition) for 2024 under the equity method. Prepare the entry to record the original investment in Mountain. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Compute the goodwill (if any) on the acquisition. Record the entry for cash dividend received under the equity method. Record the entry for investment revenue under the equity method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On July 1, 2024, Clearwater Incorporated purchased 8,000 shares of the outstanding common stock of Mountain Corporation at a cost of $160,000. Clearwater will have
significant influence over the financial and operating policies of Mountain. Mountain had 40,000 shares of outstanding common stock. Assume the total book value and fair
value of identifiable net assets is $750,000. Both companies have a January through December fiscal year. The following data pertains to Mountain Corporation during
2024:
Dividends declared and paid, January 1-June 30 $ 13,000
Dividends declared and paid, July 1-December 31 $ 13,000
Net income, January 1-June 30
$ 15,000
Net income, July 1-December 31
$ 19,000
Required:
1. Prepare the entry to record the original investment in Mountain.
2. Compute the goodwill (if any) on the acquisition.
3. Prepare the necessary entries (other than acquisition) for 2024 under the equity method.
Prepare the entry to record the original investment in Mountain.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Compute the goodwill (if any) on the acquisition.
Record the entry for cash dividend received under the equity method.
Record the entry for investment revenue under the equity method.
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