At December 31, 2013, the stockholders' equity of Gost Corporation and its 80%-owned subsidiary, Tree Corporation, are as follows:
Gost's Investment in Tree is equal to 80 percent of Tree's book value. Tree Corporation issued 225 additional shares of common stock directly to Gost on January 1, 2014 at $18 per share.
Required:
1. Compute the balance in Gost's Investment in Tree account on January 1, 2014 after the new investment is recorded.
2. Determine the increase or decrease in goodwill from Gost's new investment in the 225 Tree shares. Use four decimal places for the ownership percentage. Assume the fair values of Tree's assets and liabilities are equal to book values.

Question

At December 31, 2013, the stockholders' equity of Gost Corporation and its 80%-owned subsidiary, Tree Corporation, are as follows:
  Gost's Investment in Tree is equal to 80 percent of Tree's book value. Tree Corporation issued 225 additional shares of common stock directly to Gost on January 1, 2014 at $18 per share.
Required:
1. Compute the balance in Gost's Investment in Tree account on January 1, 2014 after the new investment is recorded.
2. Determine the increase or decrease in goodwill from Gost's new investment in the 225 Tree shares. Use four decimal places for the ownership percentage. Assume the fair values of Tree's assets and liabilities are equal to book values.

Quizplus · Accepted Answer

The Answer of At December 31, 2013, the stockholders' equity of Gost Corporation and its 80%-owned subsidiary, Tree Corporation, are as follows:
  Gost's Investment in Tree is equal to 80 percent of Tree's book value. Tree Corporation issued 225 additional shares of common stock directly to Gost on January 1, 2014 at $18 per share.
Required:
1. Compute the balance in Gost's Investment in Tree account on January 1, 2014 after the new investment is recorded.
2. Determine the increase or decrease in goodwill from Gost's new investment in the 225 Tree shares. Use four decimal places for the ownership percentage. Assume the fair values of Tree's assets and liabilities are equal to book values.

At December 31, 2013, the Stockholders' Equity of Gost Corporation