Culver Corporation purchased a 25% interest in Krov Corporation on January 2, 20
ID: 2541674 • Letter: C
Question
Culver Corporation purchased a 25% interest in Krov Corporation on January 2, 2017, for $800. At that time, the carrying amount of Krov’s net assets was $3,020. Any excess of the cost of the investment over Culver’s share of Krov’s carrying amount can be attributed to unrecorded intangibles with a useful life of 20 years. Krov declared and paid a dividend of $18 and reported net income of $35 for its year ended December 31, 2017.
Prepare Culver’s 2017 entries to record all transactions and events related to the investment in its associate. Assume that Culver is a publicly accountable enterprise that applies IFRS. (Round answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Culver Corporation purchased a 25% interest in Krov Corporation on January 2, 2017, for $800. At that time, the carrying amount of Krov’s net assets was $3,020. Any excess of the cost of the investment over Culver’s share of Krov’s carrying amount can be attributed to unrecorded intangibles with a useful life of 20 years. Krov declared and paid a dividend of $18 and reported net income of $35 for its year ended December 31, 2017.
Date
Account Titles and Explanation
Debit
Credit
_______________________
________________________
Dividend received from associate:
__________________________
__________________________
Culver’s share of associate’s net income:
__________________________
__________________________
Amortization of Krov’s unrecognized intangible assets:
________________________
________________________
Date
Account Titles and Explanation
Debit
Credit
Explanation / Answer
Amount Paid : $ 800
share in Fair value of net asset :3020*.25 = 755
Goodwill : 800 -755 = $ 45 (Not recognised in case firm applies IFRS .considered as part of cost of investment and thus not amortised]
Date Account Debit credit Jan 2,2017 Investment in associate 800 cash 800 [Being investment made] 31dec 2017 cash 4.5 Investment in associate 4.5 [Being share of dividend recorded 18*.25] 31 dec 2017 Investment in associate 8.75 share in net income of associate 8.75 [[share of net income recorded 35*.25] 31 dec 2017 No entry for amortisation under IFRS as goodwill is considered as part of cost.Related Questions
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