On June 1, 2022, Madison Corporation purchased 100,000 shares of Steller, Inc., common stock for $2,000,000. The investment represents a 20% interest in the net assets of Steller. On October 30, 2022, Madison received dividends of $0.50 per share on the Steller investment. Steller reported net income of $500,000 for the year ended December 31, 2022. The market value of the Steller stock was $28 per share on December 31, 2022. On June 1, 2022, the book value of Steller's net assets was $7,000,000. The fair value of Steller's depreciable assets, with an average remaining useful life of ten years, exceeded their book value by $200,000. Steller depreciates its assets by the straight-line method. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. INSTRUCTIONS: a) Prepare all appropriate journal entries related to the investment during 2022, assuming the 20% interest does gives Madison the ability to exercise significant influence over Steller's operations. b) Prepare all appropriate journal entries related to the investment during 2022, assuming the 20% interest does not give Madison the ability to exercise significant influence over Steller's operations
On June 1, 2022, Madison Corporation purchased 100,000 shares of Steller, Inc., common stock for $2,000,000. The investment represents a 20% interest in the net assets of Steller. On October 30, 2022, Madison received dividends of $0.50 per share on the Steller investment. Steller reported net income of $500,000 for the year ended December 31, 2022. The market value of the Steller stock was $28 per share on December 31, 2022. On June 1, 2022, the book value of Steller's net assets was $7,000,000. The fair value of Steller's depreciable assets, with an average remaining useful life of ten years, exceeded their book value by $200,000. Steller depreciates its assets by the straight-line method. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. INSTRUCTIONS: a) Prepare all appropriate journal entries related to the investment during 2022, assuming the 20% interest does gives Madison the ability to exercise significant influence over Steller's operations. b) Prepare all appropriate journal entries related to the investment during 2022, assuming the 20% interest does not give Madison the ability to exercise significant influence over Steller's operations
Chapter1: Financial Statements And Business Decisions
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Problem 1Q
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