Investments
Not what you're looking for?
On January 1, 2005, Gardner Associates purchased 30 percent of the outstanding shares of stock of Gillen Corp. for $150,000 cash. The investment will be accounted for by the equity method. On that date, Gillen's net assets (book and fair value) were $300,000. Gardner has determined that the excess of the cost of its investment in Gillen over its share of Gillen's net assets is attributable to equipment whose market value exceeds its carrying value by $100,000 and to an operating license whose market value exceeds its canying value by $100,000. The remaining useful life of the equipment is ten years and the I'P.n1aining useful life of the operating license is 20 years.
Gillen's net income for the year ended December 31,2005, was $60,000. During 2005, Gardner received $5,000 cash dividends from Gillen. There were no other transactions between the two companies.
Required
Compute the amount that would be reported on Gardner Associates' books for the investment in Gillen Corp. at December 31, 2005.
Purchase this Solution
Solution Summary
The solution explains how to calculate the ending balance in the investments account.
Solution Preview
The amount invested is 150,000.
On book value of 300,000, 30% of investment comes to 90,000. The excess investment is 60,000. This is attributable to equipment and license and since each of them is excess by ...
Purchase this Solution
Free BrainMass Quizzes
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.