On July 1,2016,Clearwater Inc.purchased 6,000 shares of the outstanding common stock of Mountain Corporation at a cost of $140,000.Mountain had 30,000 shares of outstanding common stock.Assume the total book value and fair value of net assets is $650,000.Both companies have a January through December fiscal year.The following data pertains to Mountain Corporation during 2016:

Required:
(1. )Prepare the entry to record the original investment in Mountain.
(2. )Compute the goodwill (if any)on the acquisition.
(3. )Prepare the necessary entries (other than acquisition)for 2016 under the equity method.

Question

On July 1,2016,Clearwater Inc.purchased 6,000 shares of the outstanding common stock of Mountain Corporation at a cost of $140,000.Mountain had 30,000 shares of outstanding common stock.Assume the total book value and fair value of net assets is $650,000.Both companies have a January through December fiscal year.The following data pertains to Mountain Corporation during 2016:

Required:
(1. )Prepare the entry to record the original investment in Mountain.
(2. )Compute the goodwill (if any)on the acquisition.
(3. )Prepare the necessary entries (other than acquisition)for 2016 under the equity method.

Quizplus · Accepted Answer

The Answer of On July 1,2016,Clearwater Inc.purchased 6,000 shares of the outstanding common stock of Mountain Corporation at a cost of $140,000.Mountain had 30,000 shares of outstanding common stock.Assume the total book value and fair value of net assets is $650,000.Both companies have a January through December fiscal year.The following data pertains to Mountain Corporation during 2016:

Required:
(1. )Prepare the entry to record the original investment in Mountain.
(2. )Compute the goodwill (if any)on the acquisition.
(3. )Prepare the necessary entries (other than acquisition)for 2016 under the equity method.