Chapter 4

Question 1

Amortize differential related to equipment

Answer 1

Income from Investment

Investment in Barclay Stock

Question 2

differential

Answer 2

amount paid in excess of the book value of net assets

Question 3

exercise
we bought 40% for 200000 and their book value of net assets is 400000
Land is undervalued 15000 and Equipment 50000 how do we book it
B records net income of 80000 and dividends of 20000

Answer 3

total fair value of company is 500000(200000/.4)
500000-400000=100000 total differential
our share 100000*.4 = 40000
15000*.4=6000 our share
50000*.4=20000 our share
500000-400000=100000-65000 excess=35000 total goodwill
our share 35000*.4 =14000 goodwill
JE
purchase:
Investment in B 200000
              Cash        200000
equity income:
Investment in B (80000*.4)32000
     Income from B                 32000
Dividends:
Cash (20000*.4) 8000
     Investment in B 8000
Amortize differential 
Income from B (20000/5)4000
    Investment in B              4000

Question 4

Disposal of differential asset

Answer 4

differential 6000 for land that was sold
Inc from B
Investment in B