Northwest Paperboard Company, a paper and allied products
manufacturer, was seeking to gain a foothold in Canada. Toward that
end, the company bought 40% of the outstanding common shares of
Vancouver Timber and Milling, Inc., on January 2, 2018, for $400
At the date of purchase, the book value of Vancouver's net assets was $775 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $20 million for the plant facilities.
The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2018.
Vancouver reported net income of $140 million for the year ended December 31, 2018. Vancouver paid a cash dividend of $30 million.
1. Prepare all appropriate journal entries related to the investment during 2018.
2. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2018?
3. What amount should Northwest report in its balance sheet as its investment in Vancouver?
4. What should Northwest report in its statement of cash flows regarding its investment in Vancouver?
|Amount in million|
|1||Investment in Vancouver||400|
|2||Investment in Vancouver||56||(140*40%)|
|Investment in Vancouver||12|
|Investment in Vancouver||2|
|Investment in Vancouver||0.5|
Get Answers For Free
Most questions answered within 1 hours.