BUS-FP4063 Assessment 1

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BUS-FP4063 Assessment 1. On January 1, 2015, the Parker Corporation acquired 10% of Simon Inc. for $420,000, even though Simon’s book value on January 1 was $3,400,000. Simon held land on its books that was undervalued by $200,000. In 2015, Simon earned $480,000 in net income and paid cash dividends of $180,000. Parker acquired an additional 30% of Simon January 1, 2016, for $1,200,000. Simon’s land remained undervalued as of that date by $240,000. Any excess cost was ascribed to a trademark with a life of 10 years for the first acquisition and a life of nine years for the second acquisition. Because fair values were not readily available, Parker maintained the initial investment of 10% at cost. The equity method will now be applied. In 2016, Simon reported $600,000 in income and $220,000 of distributed dividends.

Complete steps 1 and 2 below.

Step 1: Restate the 2015 purchase to the equity method in Tables 1, 2, and 3.

Step 2: Record the 2016 journal entries for Parker, using Tables 4–8 below.

BUS-FP4063 Assessment 1