Question FourGiant Inc. acquires 10% of Small Corporation on January 1, 2010, for $90,000 when the book valueof Small was $800,000. On that date, Small Corporation had a patent that was undervalued in itsbooks by $100,000 with a useful life of 10 years.During 2010 Small reported net income of $125,000 and declared and paid dividends of $30,000.The company classifies the investment as available for sale securities. During 2011, Small earnednet income of $100,000 and declared and paid dividends of $20,000.On January 1, 2012, Giant purchased an additional 20% of Small for $325,000, giving Giant theability to significantly influence the operating policies of Small. On that date, a patent with auseful life of 8 years was undervalued by $110,000. During 2012, Small, reported net income of$150,000 and declared and paid dividends of $30,000.Required:1. Prepare a schedule showing the allocation of the consideration transferred in relation tothe acquisition made on January 1, 2012.2. Prepare the necessary journal entry(ies) for the year 2012?3. Calculate the balance of the Investment in Small account that would be reported inGiant's Balance Sheet at December 31, 2012.

Given: G Corporation acquires 10% on January 1 2020 with $90,000 when the book value of Small was…

Question Four Giant Inc. acquires 10% of Small Corporation on January 1, 2010, for $90,000 when the book value of Small was $800,000. On that date, Small Corporation had a patent that was undervalued in its books by $100,000 with a useful life of 10 years. During 2010 Small reported net income of $125,000 and declared and paid dividends of $30,000. The company classifies the investment as available for sale securities. During 2011, Small earned net income of $100,000 and declared and paid dividends of $20,000.

Question Four Giant Inc. acquires 10% of Small Corporation on January 1, 2010, for $90,000 when the book value of Small was $800,000. On that date, Small Corporation had a patent that was undervalued in its books by $100,000 with a useful life of 10 years. During 2010 Small reported net income of $125,000 and declared and paid dividends of $30,000. The company classifies the investment as available for sale securities. During 2011, Small earned net income of $100,000 and declared and paid dividends of $20,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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