Timber, Inc. acquires 10% of Lake Co. on January 1, 2023 for $124,000 and appropriately accounted for the investment using the fair - value method. On January 1, 2024, Timber purchased an additional 25% of Lake for $390,000, achieving the ability to exert significant influence over Lake. On that date (i.e., Jan. 1, 2024), the fair value of Lake's common stock was $1,560,000 in total. Lake's January 1, 2024, book value equaled $ 1,280,000, although a land was undervalued by $ 70,000. Any additional excess cost over fair value was attributable to an undervalued patent with a 5-year remaining life. During 2024, Lake reported net income of $ 380,000 and paid dividends of $60,000 Based on the above information, use the prospective approach to account for the change to the equity method and determine the following numbers. 1. The amount of annual excess amortization for 2024 2. Excess allocated to land? 3. excess allocated To patent? 4. The amount of equity income that Timber should report for 2024 5. the balance of Investment in Lake account at the end of 2024.
Timber, Inc. acquires 10% of Lake Co. on January 1, 2023 for $124,000 and appropriately accounted for the investment using the fair - value method. On January 1, 2024, Timber purchased an additional 25% of Lake for $390,000, achieving the ability to exert significant influence over Lake. On that date (i.e., Jan. 1, 2024), the fair value of Lake's common stock was $1,560,000 in total. Lake's January 1, 2024, book value equaled $ 1,280,000, although a land was undervalued by $ 70,000. Any additional excess cost over fair value was attributable to an undervalued patent with a 5-year remaining life. During 2024, Lake reported net income of $ 380,000 and paid dividends of $60,000 Based on the above information, use the prospective approach to account for the change to the equity method and determine the following numbers. 1. The amount of annual excess amortization for 2024 2. Excess allocated to land? 3. excess allocated To patent? 4. The amount of equity income that Timber should report for 2024 5. the balance of Investment in Lake account at the end of 2024.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 18E
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Question
![Timber, Inc. acquires 10% of Lake Co. on January 1, 2023 for $124,000 and appropriately accounted for the investment using the fair - value method. On January 1, 2024, Timber purchased an additional 25% of Lake for
$390,000, achieving the ability to exert significant influence over Lake. On that date (i.e., Jan. 1, 2024), the fair value of Lake's common stock was $1,560,000 in total. Lake's January 1, 2024, book value equaled $
1,280,000, although a land was undervalued by $ 70,000. Any additional excess cost over fair value was attributable to an undervalued patent with a 5-year remaining life. During 2024, Lake reported net income of $
380,000 and paid dividends of $60,000
Based on the above information, use the prospective approach to account for the change to the equity method and determine the following numbers.
1. The amount of annual excess amortization for 2024
2. Excess allocated to land?
3. excess allocated To patent?
4. The amount of equity income that Timber should report for
2024
5. the balance of Investment in Lake account at the end of 2024.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0ab78794-93a0-4bbe-a35d-ddeaad9079c5%2F455167a0-2f61-4e34-a0aa-9acf01b8bffc%2Feee7y87_processed.png&w=3840&q=75)
Transcribed Image Text:Timber, Inc. acquires 10% of Lake Co. on January 1, 2023 for $124,000 and appropriately accounted for the investment using the fair - value method. On January 1, 2024, Timber purchased an additional 25% of Lake for
$390,000, achieving the ability to exert significant influence over Lake. On that date (i.e., Jan. 1, 2024), the fair value of Lake's common stock was $1,560,000 in total. Lake's January 1, 2024, book value equaled $
1,280,000, although a land was undervalued by $ 70,000. Any additional excess cost over fair value was attributable to an undervalued patent with a 5-year remaining life. During 2024, Lake reported net income of $
380,000 and paid dividends of $60,000
Based on the above information, use the prospective approach to account for the change to the equity method and determine the following numbers.
1. The amount of annual excess amortization for 2024
2. Excess allocated to land?
3. excess allocated To patent?
4. The amount of equity income that Timber should report for
2024
5. the balance of Investment in Lake account at the end of 2024.
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