Excess payment $10,000 Value of patent in excess of book value ($15,000 × 40%) 6,000 Goodwill $ 4,000 Amortization: Patent ($6,000 ÷ 6) $1,000 Goodwill -0- Annual amortization $1,000 Acquisition price $60,000 Basic equity accrual 2014 ($30,000 × 40%) 12,000 Dividends—2014 ($10,000 × 40%) (4,000) Amortization—2014 (above) (1,000) Investment in Holister, 12/31/14 $67,000 Basic equity accrual ($50,000 × 40%) 20,000 —2015 Dividends—2015 (6,000) Amortization—2015 (above) (1,000) Investment in Holister, 12/31/15 $80,000 b. Dividend income ($15,000 × 40%) $6,000 Increase in fair value ($75,000 $68,000) 7,000 – Investment income under fair value accounting—2015 $13,000 17. (10 minutes) (Equity entries for one year, includes intra-entity transfers but no unearned gross profit) Purchase price of Burks stock $210,000 Book value of Burks stock ($360,000 × 40%) (144,000) Unidentified asset (goodwill) $ 66,000 Life indefinite Annual amortization $ -0- No unearned intra-entity profit exists at end because all of the transferred year’s merchandise was used during the period. 17. (continued) Investment in Burks, Inc. 210,000 Cash (or a Liability) 210,000 To record acquisition of a 40 percent interest in Burks. Investment in Burks, Inc. 32,000
Excess payment $10,000 Value of patent in excess of book value ($15,000 × 40%) 6,000 Goodwill $ 4,000 Amortization: Patent ($6,000 ÷ 6) $1,000 Goodwill -0- Annual amortization $1,000 Acquisition price $60,000 Basic equity accrual 2014 ($30,000 × 40%) 12,000 Dividends—2014 ($10,000 × 40%) (4,000) Amortization—2014 (above) (1,000) Investment in Holister, 12/31/14 $67,000 Basic equity accrual —2015 ($50,000 × 40%) 20,000 Dividends—2015 (6,000) Amortization—2015 (above) (1,000) Investment in Holister, 12/31/15 $80,000 b. Dividend income ($15,000 × 40%) $6,000 Increase in fair value ($75,000 – $68,000) 7,000 Investment income under fair value accounting—2015 $13,000 17. (10 minutes) (Equity entries for one year, includes intra-entity transfers but no unearned gross profit) Purchase price of Burks stock $210,000 Book value of Burks stock ($360,000 × 40%) (144,000) Unidentified asset (goodwill) $ 66,000 Life indefinite Annual amortization $ -0- No unearned intra-entity profit exists at year’s end because all of the transferred merchandise was used during the period. 17. (continued) Investment in Burks, Inc. 210,000 Cash (or a Liability) 210,000 To record acquisition of a 40 percent interest in Burks. Investment in Burks, Inc. 32,000
Advanced_Accounting__12e_by_hoyle_solution_manual.docx