Answer:
Calculation of 2014 equity in net income
Better Bottler's net income $1,125,000
($2,500,000* 45%)
Less: Amortization of patents and $450,000
trademarks revaluation
(160-150* 1000,000/10 at 45%)
Less: Amortization of brand names $270,000
($9000,000 /15 at 45%)
Equity in net income of Better bottles $405,000
Journal entries
Description Debit Credit
Investment in better bottles $405,000
Equity in net income of better bottle $405,000
Cash $292,500
($650,000 * 45%)
investment in better bottles $292,500
b) Calculation of investment balance
Investment balance, Jan 2,2014 $30,000,000
+ Reported income less dividends $5,400,000
($25,000,000 equity - $13,000,000 retained
earnings) * 45%
- 4 yr of revaluation write off
($450,000 * 4) $1,800,000
($270,000 *4) <u>$1,080,000</u>
Investment balance, Dec 31, 2017 <u>$32,520,000</u>
