LAB 3 – STOCK INVESTMENT FATA 2015

LAB 3
STOCK INVESTMENT

SOLUTION

I. Multiple Choice
1. d
2. d
3. b
4. b
5. b

II. Mini Essay

1.a
Total FATA Co. Common Stock’s after acquisition = 60.000 shares + 20.000 shares =
80.000 Shares
FITI Co. Percentage ownership = (20.000 shares/80.000 shares) × 100% = 25%

1.b
Goodwill = Investment Cost – Book Value of Equity
= $600.000 – (($1.200.000 + $600.000) × 25%)
= $600.000 - $450.000
= $150.000

2.a dan 2.b

2.a Fair Value/Cost Method 2.b Equity Method
To record investment
Investment in Moon Co $8.000 Investment in Moon Co $8.000
Cash $8.000 Cash $8.000
To record Dividend ($400.000 x 50%)
Cash $200.000 Cash $200.000
Dividend Income $200.000 Investment in Moon Co. $200.000
To recognize earnings ($800.000 x 50%)
Investment in Moon Co. $400.000
No entry
Income from Moon Co. $400.000

3. Income from Silver Co. for 2018

Net Income of Silver Co = Retained Earnings 2018 – Retained Earnings 2017 +
Dividend
= $625.000 – $500.000 + $125.000
= $250.000
Income from Silver Co. = $250.000 x 30% = $75.000

FAQIH – HANIFA – IRMAYANTI - JHOICE 1

 LAB 3 – STOCK INVESTMENT FATA 2015

III. Grand Essay

1. Schedule to allocating excess of cost over book value (in $)

Investment in Tremor Co. 3,780,000
BV of interest acquired ($8.775.000 × 30%) 2.632.500
Total Excess of cost over BV 1.147.500

Assignment to identifiable net asset (in $000):

Net Asset FV BV % Acquired Amount
Inventories 2700 2250 135
Land 3.825 2.025 540
- × =
Buildings-net 4.500 3.375 30% 337,5
Equipment-net 1.125 2.700 (472,5)
Bonds Payable 2.475 2.250 (67.5)
Total assigned to net identifiable asset 472,5
Remainder assigned to goodwill 675
Total Excess od cost over book value acquired 1.147,5

2. FATA’s income from Tremor for 2018 (in $000)

Amount
Equity in Tremor reported income (2.700 x 30%) 810
Amortization of excess cost over BV:
Inventories (sold) (135)
Buildings-net (337.5/10 years) (33.75)
Equipment-net (472.5/7 years) 67.5
Bonds Payable (67.5/5 years) 13.5
Income from Tremor 722.25

3. Investment in Tremor balance December 31, 2108 (in$000)

Amount
Investment Cost 3,780
Add : Income from Tremor 722.25
Less : Dividends ($1.350.000 x 30%) 405
Investment in Tremor December 31, 2018 4.097.25

4. Journal Entries
 Journal to record investment in Tremor
Investment in Tremor $3.780.000
Cash $3.780.000

 Journal to record dividend

Cash $405.000
Investment in Tremor $405.000

FAQIH – HANIFA – IRMAYANTI - JHOICE 2

LAB 3 – STOCK INVESTMENT FATA 2015

 Journal to record income from Tremor

Investment in Tremor $810.000
Income from Tremor $810.000

 Journal to record writte-off of excess allocated to Inventory

Income from Tremor $135.000
Investment in Tremor $135.000

 Journal to record depreciation or excess allocated to undervalued buildings with

10 years remaining useful life
Income from Tremor $33.750
Investment in Tremor $33.750

 Journal to record depreciation or excess allocated to overvalued equipment with

10 years remaining useful life
Investment in Tremor $67.500
Income from Tremor $67.500

 Journal to record amortization of bonds payable

Investment in Tremor $13.500
Income from Tremor $13.500

FAQIH – HANIFA – IRMAYANTI - JHOICE 3