Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $
ID: 2611831 • Letter: M
Question
Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $197,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased an additional 30 percent of Seida for $645,000 which resulted in significant influence over Seida. On that date, the fair value of Seida's common stock was $2,060,000 in total. Seida's January 1, 2018 book value equaled $1,910,000, although land was undervalued by $137,000. Any additional excess fair value over Seida's book value was attributable to a trademark with an 8-year remaining life. During 2018, Seida reported income of $278,000 and declared and paid dividends of $113,000. Prepare the 2018 journal entries for Milani related to its investment in Seida.
Record 2018 amortization for trademark excess fair value.
Explanation / Answer
December 31,2018
**
amortisation : 32200/8 = $4025
Date Account Debit credit January 21,2018 Investment in seida 645000 cash 645000 [being additional investment made] december 31,2018 Investment in seida 111200 Equity income -investment in seida 111200 [being share of net income recorded][278000*.40]December 31,2018
cash 45200 Investment in seida 45200 [being dividend received 113000*.40] 31 december 2018 Equity income -Investment in seida 4025 Investment in seida 4025 [being annual amortisation of trademark ]