Question

Accounting . Can you please assist me

Marble Inc acquired 25% of New Metal Enterprise for $2,000,000 on January 1,2013                              
The fair value and book value of 25% of New Metal Enterprise net assets were $2,000,000                               
and $1,600,000 respectively on that date and the difference was attributable to undervalue                               
plant assets that would depreciate over 10 years.                               
During 2013 New Metal Enterprise reported net income of $ 800,000 and paid dividends of $400,000                              
New Metal Enterprise had a total fair value of $10,00,000 as of December 31,2013                              
Marble on acquisition elected to use the Fair Value method to account for this investment                               
                              
Required :                              
1) Prepare the journal entry to record the acquisiton of this investment on January 1 ( 3 pts)                              
                              
2) Prepare the journal entry or entries for rest of the year including and any end of year (9 pts)                              
                              
3) On Marble s balance Sheet at December 31, 2013, the investment account will have what balance ? (6 pts)                              
                              
4) On Marble s Income statement for year ended December31, 2013 what will be reported                               
on the Income Statement ( FS item and amount ) (6pts)                              
                              
5) If Marble had used the equity method the investment account balance at December 31,2013 amount ?                               
(6 pts)                              

Answer 1

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