Damon, Inc., acquired 25% of Jolie Enterprises for $8,000,000 on October 1, 2018. The total fair...

Damon, Inc., acquired 25% of Jolie Enterprises for $8,000,000 on October 1, 2018. The total fair value of Jolie's identifiable net assets was $27,000,000 on that date, and the total book value of those net assets was $23,000,000.

The difference between fair value and book value is attributed to equipment that has a remaining useful life of 4 years. During 2018 Jolie recognized net income of $2,000,000 and paid dividends of $1,200,000 ($300,000 per quarter). Jolie had a fair value of $36,000,000 as of December 31, 2018.

Required: Assume Damon accounts for the Jolie investment under the equity method. Indicate the total effect of the Jolie investment on Damon's:

1) Net income for 2018.

2) The balance in Damon's investment account on December 31, 2018.

Expert Solution

ekkarill92 answered 11 months ago

On July 1, 2018, Boone Company acquired the following assets from Judge Company for $8,000,000: CV...

On July 1, 2018, Boone Company acquired the following assets from Judge Company for $8,000,000: CV of assets on Judge’s book on 6/30/18 Appraised FV of assets on 7/1/18 Land $ 500,000 $6,000,000 Office Building 2,000,000 $1,000,000 Warehouse $3,000,000 $1,500,000 Equipment $2,000,000 $1,500,000 Boone’s accountant was not sure how to value the assets, so he decided to simply expense everything and hope that no one would notice. During the annual external audit in January 2021, the new auditing firm discovered...

On January 1, 2018, Johnsonville Enterprises, Inc. acquired 80 percent of Stayer Company’s outstanding common shares...

On January 1, 2018, Johnsonville Enterprises, Inc. acquired 80 percent of Stayer Company’s outstanding common shares in exchange for $3,000,000 cash. The price paid for the 80 percent ownership interest was proportionately representative of the fair value of all of Stayer’s shares. At acquisition date, Stayer’s books showed assets of $4,200,000 and liabilities of $1,600,000. The recorded assets and liabilities had fair values equal to their individual book values except that a building (10-year remaining life) with book value of...

Brown Inc. acquired a delivery van on October 1, 2017 at a cost of $45,000. The...

Brown Inc. acquired a delivery van on October 1, 2017 at a cost of $45,000. The useful life of the van was 12 years with a residual value of $3,000. Assume that the company used straight-line method with fractional years rounded to the nearest whole month. The delivery van was traded-in with a new one as of end of the year of 2018 (December 31, 2018). The list price of the new delivery van was $56,000. The Brown Inc. accepted...

Panama Company acquired 60 % of Samoa Corporation on 1/2018. Fair values of Samoa's assets and...

Panama Company acquired 60 % of Samoa Corporation on 1/2018. Fair values of Samoa's assets and liabilities approximated book values on that date. Panama uses the initial value method to account for its investment in Samoa. On 1/2019, Panama bought equipment from Samoa for $60,000 that had originally cost Samoa $120,000 and had $ 90,000 of Accumulated depreciation at the time. The equipment had a five-year remaining life and was being depreciated using the straight line method. You are preparing...

On Janaury 1, 2016 PJ Co. acquired 25% interest in AEJR Enterprises for $307,500. The price...

On Janaury 1, 2016 PJ Co. acquired 25% interest in AEJR Enterprises for $307,500. The price reflected the assessment that all AEJR's assets and liabilities were stated at fair value. During 2016 AEJR reported net income of $160,000 and paid dividends of $40,000. PJ Co. uses the equity method to account for its investment in AEJR Enterprises. On January 1, 2017 PJ Co. acquired an additional 50% of AEJR Enterprises for $800,000. At the time of this second acquisition, PJ...

At the beginning of 2018, VHF Industries acquired a equipment with a fair value of $9,947,400...

At the beginning of 2018, VHF Industries acquired a equipment with a fair value of $9,947,400 by issuing a three-year, noninterest-bearing note in the face amount of $12 million. The note is payable in three annual installments of $4 million at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What is the effective rate of...

At the beginning of 2018, VHF Industries acquired a equipment with a fair value of $7,209,560...

At the beginning of 2018, VHF Industries acquired a equipment with a fair value of $7,209,560 by issuing a five-year, noninterest-bearing note in the face amount of $10 million. The note is payable in five annual installments of $2 million at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What is the effective rate of...

At the beginning of 2018, VHF Industries acquired a machine with a fair value of $6,074,700...

At the beginning of 2018, VHF Industries acquired a machine with a fair value of $6,074,700 by signing a four-year lease. The lease is payable in four annual payments of $2 million at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What is the effective rate of interest implicit in the agreement? 2-4. Prepare the...

Selected financial information about Backpacking Resources, Inc., is as follows: Total assets $20,000,000 Total liabilities $8,000,000...

Selected financial information about Backpacking Resources, Inc., is as follows: Total assets $20,000,000 Total liabilities $8,000,000 Total preferred stock $3,000,000 Total annual preferred stock dividends $210,000 Net profits after tax $1,000,000 Number of shares of common stock outstanding 400,000 shares Current market price of common stock $57.00 a share Annual common stock dividends $2.28 a share Using the company's financial information, compute the following: A) Dividend yield. Round the answer to two decimal places. ________% B) Book value per share....

On January 1, 2016, Alpha acquired 80 percent of Delta. Of Delta's total business fair value,...

On January 1, 2016, Alpha acquired 80 percent of Delta. Of Delta's total business fair value, $224,000 was allocated to copyrights with a 20-year remaining life. Subsequently, on January 1, 2017, Delta obtained 70 percent of Omega's outstanding voting shares. In this second acquisition, $148,200 of Omega's total business fair value was assigned to copyrights that had a remaining life of 12 years. Delta's book value was $585,000 on January 1, 2016 and Omega reported a book value of $181,500...

Question