Please, don\'t forget to prepare all journal entries for required #1 On January
ID: 2423246 • Letter: P
Question
Please, don't forget to prepare all journal entries for required #1
On January 1, 2016, Cameron Inc. bought 30% of the outstanding common stock of Lake Construction Company for $300 million cash. At the date of acquisition of the stock, Lake's net assets had a fair value of $800 million. Their book value was $600 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference. Lake's net income for the year ended December 31, 2016, was $210 million. During 2016, Lake declared and paid cash dividends of $20 million. The buildings have a remaining life of 5 years. Required: 1. Complete the table below and prepare all appropriate journal entries related to the investment during 2016, assuming Cameron accounts for this investment by the equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions, (i.e., 10,000,000 should be entered as 10).) 2. Determine the amounts to be reported by Cameron: (Amounts to bo deducted should be indicated with a minus sign. Enter your answers in millions, (i.o., 10,000,000 should be entered as 10).)Explanation / Answer
Answer:1
1/1 Investment in Lake shares A/C Dr. $ 300,000,000
To Cash A/C $300,000,000
Cash A/C Dr. (30% x 30,000,000) $9,000,000
To Investment in Lake shares A/C $ 9,000,000
12/31 Investment in Lake shares A/C Dr. $ 30,000,000
To Investment revenue A/C $30,000,000
20% x 150,000,000
12/31 Investment revenue A/C Dr. $ 6,000,000
To Investment in Lake shares A/C $ 6,000,000
30% x [(½ x 200,000,000) ÷ 5]
Answer:2
Particulars Amount ($ in millions) A. investment in Cameron's 2016 balance sheet 315 B. Investment revenue in the income statement 24 C. Investment in the statement of cash flows 300