Question Details

(solution) Saxton Corporation purchased 25 percent of Taylor Company's


Saxton Corporation purchased 25 percent of Taylor Company's voting stock on January 1, 2013, for $3 million in cash. At the date of acquisition, Taylor reported its total assets at $60 million and its total liabilities at $56 million. Investigation revealed that Taylor's plant and equipment (15-year life) was overvalued by $1.8 million and it had an unreported customer database (2-year life) valued at $500,000. Taylor declares and pays $100,000 in dividends and reports net income of $250,000 in 2016.

Required
Prepare the necessary journal entries on Saxton's books to report the above information for 2016 assuming Saxton uses the equity method to report its investment.

Enter answers in thousands. For example, $1 million is $1,000 and $100,000 is $100.


Answers are in thousands of dollars

 

Analysis:

 

Over-depreciation amount for 4years= $1800/15*4 =$480

 

Saxton?s share= 0.25*$480=$120

 

Excess bargain purchase option = $1800

 

Saxton?s share...

 


Solution details:

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Sep 13, 2020

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