Business, 28.07.2020 21:01 hopechinn6646
On January 1, 20X0, Hunter Corporation issued 8,000 of its $15 par value shares to acquire 45 percent of the shares of Arrow Manufacturing. Arrow Manufacturing's balance sheet immediately before the acquisition contained the following items:
ARROW MANUFACTURING
Balance Sheet
January 1, 20X0
Book Value Fair Value
Assets
Cash and Receivables $36,000 $36,000
Land 70,000 80,000
Buildings & Equipment (net) 126,000 156,000
Patent 80,000 80,000
Total Assets 312,000
Liabilities & Equities
Accounts Payable $126,000 126,000
Common Stock 138,000
Retained Earnings 48,000
Total Liabilities & Equities $312,000
On the date of the stock acquisition, Hunter's shares were selling at $40, and Arrow Manufacturing's buildings and equipment had a remaining economic life of 5 years. The amount of the differential assigned to goodwill is not impaired.
In the two years following the stock acquisition, Arrow Manufacturing reported net income of $85,000 and $55,000 and paid dividends of $27,000 and $45,000, respectively. Hunter used the equity method in accounting for its ownership of Arrow Manufacturing.
a. Prepare the entry recorded by Hunter Corporation at the time of acquisition.
b-1. Prepare the journal entries recorded by Hunter during 20X0 related to its investment in Arrow Manufacturing.
b-2. Prepare the journal entries recorded by Hunter during 20X1 related to its investment in Arrow Manufacturing.
c. What balance will be reported in Hunter’s investment account on December 31, 20X1?
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On January 1, 20X0, Hunter Corporation issued 8,000 of its $15 par value shares to acquire 45 percen...
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