Question

On July 1, 2021, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $150 million cash, giving Gupta the ability to exercise significant influence over VB's operations. At the date of acquisition of the stock, VB's net assets had a total fair value of $480 million and a book value of $240 million. Of the $240 million difference, $30 million was attributable to the appreciated value of inventory that was sold during the last half of 2021, $168 million was attributable to buildings that had a remaining depreciable life of 15 years, and $42 million related to equipment that had a remaining depreciable life of 10 years. Between July 1, 2021, and December 31, 2021, VB earned net income of $32 million and declared and paid cash dividends of $24 million. Required: 1. Prepare all appropriate journal entries related to the investment during 2021, assuming Gupta accounts for this investment by the equity method. 2. Determine the amounts to be reported by Gupta. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare all appropriate journal entries related to the investment during 2021, assuming Gupta accounts for this investment by the equity method. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).) Show less View transaction list Journal entry worksheet Record the amortization of the differential. Note: Enter debits before credits. Transaction General Journal Debit Credit Investment revenue Investment in equity affiliate

I am having trouble with doing the journal entry to record the amortization of the differential and completing requirement 2 Please help!

Answer 1

с D E Debit (S) W.N Credit (S) 1,500,000,000 1,500,000,000 au w 80000001 =32000000*25% 8000000 ДА в 1 1) 2 Date Particulars 01-07-21 Investment in Company VB Shares Cash To record purchase of investment 31-12-21 Investment in Company LC Shares Investment Revenue To record shares of net income as revenue from Investment 31-12-21 Cash 10 | Investment in Company LC Shares 11 To record receipt of dividends 12 31-12-21 Investment Revenue | Investment in Company V Shares 14 To record amortization adjustment o 9 6000000 =24000000*25% 6000000 9425000 Working Note 9425000 13

B Amount Calculation 120000000] =480000000*25% 60000000] =240000000*25% 600000000 16 Working Note: 17 Details Amount 18 Share of investor in fair value of investee's net assets 19 Share of investor in book value of investee's net assets 20 Difference of depreciable net assets 21 22 Amount attributed to inventory 23 Amount attributed t building 24 Deprecation of Building 25 Amount attributed to equipment 26 Depreciation of Equipment 27 Total Amortization 7500000] =30000000*25% 42000000] =168000000*25% 1400000 =42000000/15*6/12 10500000 =42000000*25% 525000] =10500000/10*6/12 9425000=C22+C24+C26

B C D | Debit A 28 29 2) 30 Investment in Company V Shares 31 Details 32 Cost 33 Share of Income 34 Total 35 Balance 36 37 Investment Revenue 38 Details 39 Depreciation 40 Total 41 Details 150000000 Dividends 8000000 Depreciation 158000000 Total 140575000 Credit 8000000 9425000 17425000 Debit Details 9425000 Share of Income 9425000 Total Balance Credit 8000000l 80000001 1425000