Answer:
Harper investment 160,000
building over fair value 16,000
royalty over fair value 34,000
cash 200,000
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<u>2017 entries:</u>
loss on Harper Investment 32,000
Harper investment 32,000
---
Cash 4,000
Harper investment 4,000
----
Unrealized gain 2,000
Harper Investment 2,000
---
royalty over fair value 1,700
bulding over fair value 1,600
harper investment 3,300
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<u>2018 entries:</u>
Harper Investment 16,000
Gain on Harper Investent 16,000
----
Cash 4800
Harper investment 4800
----
Unrealized gain 1,600
Harper Investment 1,600
---
royalty over fair value 1,700
bulding over fair value 1,600
harper investment 3,300
Explanation:
400,000 x 40% = 160,000
40,000 increase infair value of building x 40% = 16,000
royalty 85,000 x 40% = 34,000
total equity value 200,000
payment of 200,000
no goodwill.
<u>amortization:</u>
building: 16,000 / 10 = 1,600
royalty: 34,000 / 20 = 1,700
2017
loss: 60,000 x 40% = (32,000)
dividends 10,000 x 40% = (4,000)
unrealized gain: it kept 15,000/90,000 = 0.1667 = 16.67%
90,000 - 30,000 = 30,000 gain x 16.67% = 5,000 unrealized gain
5,000 x 40% = 2,000
2018
income 40,000 x 40% = 16,000
dividends 12,000 x 40% = (4,800)
unrealized gain kept 30%
80,000 - 50,000 = 30,000 x 30% = 9,000
the company has 40% so 9,000 x 40% = 3,600 unrealized
as we recognize 2,000 before we adjust for the difference of 1,600