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Milani acquire 10% of Seida Corp. on January 1, 2017, for 190,000 and appropriately accounted for...

Milani acquire 10% of Seida Corp. on January 1, 2017, for 190,000 and appropriately accounted for the investment using the fair-value method. On January1, 2018. Milany purchased an additional 30% of Seida for $600,000 which resulted in significant influence over Seida. On that day, the fair value of Seida's common stock was $2,000,000 in total. Seida's January1, 2018, book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seida's book value attributable to trademark with an 8=year remaining life. During 2018, Seida reported income of $300,000 and declared and paid dividends of $110,000. Prepare the 2018 Journal entries for Milani related to its investment in Seida. and Schedule 1: Allocation of acquisition price and related amortization.

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No. General Journal Debit Credit
1 Investment in Seida 600,000
Cash 600,000
2 Investment in Seida 120,000
Equity income-Investment in Seida 120,000
3 Equity income-Investment in Seida 1,500
Investment in Seida 1,500
4 Dividends receivable 44,000
Investment in Seida 44,000
5 Cash 44,000
Dividends receivable 44,000
Working Notes:
No. General Journal Debit Credit
1 Investment in Seida 600,000
Cash 600,000
2 Investment in Seida 120,000
Equity income-Investment in Seida 120,000
3 Equity income-Investment in Seida 1,500
Investment in Seida 1,500
Calculation annual amortization on January 1st 2018
Purchase price of 30% of Seida’s stock 600,000 a
Fair value of original 10% investment in Seida 200,000 b
[(600,000/30%)x10%= 200,000]
Total fair value of 40% investment in Seida 800,000 c=a+b
Book value of Seida stock 740,000 d
[$1,850,000 × 40%]
Fair value in excess of book value 60,000 e=c-d
Excess cost assigned to undervalued land 48,000 f
($120,000 × 40%)
Trademark 12,000 g=e-f
Remaining life of Trademark 8 years h
Annual amortization $1,500 g/h
4 Dividends receivable 44,000
Investment in Seida 44,000
[ $ 110,000 x (30%+10%)=$44,000]
5 Cash 44,000
Dividends receivable 44,000

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