Question
In: Accounting
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2018, for $450
million.
At the date of purchase, the book value of Vancouver's net assets
was $800 million. The book values and fair values for all balance
sheet items were the same except for inventory and plant
facilities. The fair value exceeded book value by $10 million for
the inventory and by $15 million for the plant facilities.
The estimated useful life of the plant facilities is 12 years. All
inventory acquired was sold during 2018.
Vancouver reported net income of $190 million for the year ended
December 31, 2018. Vancouver paid a cash dividend of $60
million.
Required:
1. Prepare all appropriate journal entries related
to the investment during 2018.
2. What amount should Northwest report as its
income from its investment in Vancouver for the year ended December
31, 2018?
3. What amount should Northwest report in its
balance sheet as its investment in Vancouver?
4. What should Northwest report in its statement
of cash flows regarding its investment in Vancouver?
Solutions
Expert Solution
| $ in Million | |||
| S. No. | Account Tittle | Debit | Credit |
| 1 | Investment in Vancouver | $450.00 | |
| Cash | $450.00 | ||
| TO Record Investment made | |||
| 2 | Investment in Vancouver ($190X40%) | $76.00 | |
| Investment Revenue | $76.00 | ||
| To Record share of Income | |||
| 3 | Cash ($60X40%) | $24.00 | |
| Investment in Vancouver | $24.00 | ||
| TO Record Dividend received | |||
| 4 | Investment Revenue | $4.00 | |
| Investment in Vancouver ($10X40%) | $4.00 | ||
| TO Record Adjustment of Inventory | |||
| 5 | Investment Revenue | $0.50 | |
| Investment in Vancouver ($15 X 40%)/12 year | $0.50 | ||
| TO Record depreciation adjustment | |||
|
2. Computation of Income from Invesment in Vancouver ( $ in Million) |
|
| Share in Income ( $190X 40%) | $76.00 |
| Less: Adjustment of Inventory | -$4.00 |
| Less: Adjustment for Depreciaiton | -$0.50 |
| Income from Invesment in V | $71.50 |
| 3. Computation of Invesment Value in Vancouver to be reported in Balance sheet( $ in Million) | |
| Investmnet Made | $450.00 |
| Add: Share in Income ( $190X 40%) | $76.00 |
| Less: Dividend Received | -$24.00 |
| Less: Adjustment of Inventory | -$4.00 |
| Less: Adjustment for Depreciaiton | -$0.50 |
| Income from Invesment in V | $497.50 |
| 4 A) Operating Cash Flow :$ 24 Million | |
| 4(b) Investng Cash Flow: $450 Million | |
ekkarill92 answered 1 year agoRelated Solutions
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2021, for $580
million.
At the date of purchase, the book value of Vancouver's net assets
was $865 million. The book values and fair values for all balance
sheet items were the same except for inventory and plant
facilities. The fair value...
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2021, for $560
million.
At the date of purchase, the book value of Vancouver's net
assets was $855 million. The book values and fair values for all
balance sheet items were the same except for inventory and plant
facilities. The fair value...
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2021, for $490
million.
At the date of purchase, the book value of Vancouver's net assets
was $820 million. The book values and fair values for all balance
sheet items were the same except for inventory and plant
facilities. The fair value...
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2018, for $420
million.
At the date of purchase, the book value of Vancouver's net assets
was $785 million. The book values and fair values for all balance
sheet items were the same except for inventory and plant
facilities. The fair value...
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2018, for $550
million.
At the date of purchase, the book value of Vancouver's net assets
was $850 million. The book values and fair values for all balance
sheet items were the same except for inventory and plant
facilities. The fair value...
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2021, for $460
million.
At the date of purchase, the book value of Vancouver's net assets
was $805 million. The book values and fair values for all balance
sheet items were the same except for inventory and plant
facilities. The fair value...
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2018, for $420
million.
At the date of purchase, the book value of Vancouver's net assets
was $785 million. The book values and fair values for all balance
sheet items were the same except for inventory and plant
facilities. The fair value...
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2018, for $540
million.
At the date of purchase, the book value of Vancouver's net assets
was $845 million. The book values and fair values for all balance
sheet items were the same except for inventory and plant
facilities. The fair value...
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2016, for $560
million. At the date of purchase, the book value of Vancouver's net
assets was $855 million. The book values and fair values for all
balance sheet items were the same except for inventory and plant
facilities. The fair value...
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in...
Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2018, for $590
million.
At the date of purchase, the book value of Vancouver's net assets
was $870 million. The book values and fair values for all balance
sheet items were the same except for inventory and plant
facilities. The fair value...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Suppose you observe the following situation: State of Economy Probability of State Return if State Occurs...
- Merger Analysis TransWorld Communications Inc., a large telecommunications company, is evaluating the possible acquisition of Georgia...
- Journal Entries and Trial Balance Elite Realty acts as an agent in buying, selling, renting, and...
- In racket Assume that the elements of a list are indexed starting with 1. Write a...
- Describe System Development Life Cycle (SDLC) and how it is used.
- What symbolism do you find in the play,Oedipus?
- • Using the Scanner class to obtain input from the user. • Using printf to output...
ADVERTISEMENT