P12-12
Northwest
Paperboard Company, a paper and allied products manufacturer, was seeking to
gain a foothold in Canada. Toward that end, the company bought 40% of the
outstanding common shares of Vancouver Timber and Milling, Inc., on January 2,
2011, for $400 million.
At the date of purchase, the book value of Vancouver's net assets was
$775 million. The book values and fair values for all balance sheet items were
the same except for inventory and plant facilities. The fair value exceeded book
value by $5 million for the inventory and by $20 million for the plant
facilities.
The estimated useful life of the plant facilities is 16 years. All
inventory acquired was sold during 2011.
Vancouver reported net income of $140 million for the year ended December
31, 2011. Vancouver paid a cash dividend of $30
million.
Required:
1. Prepare
all appropriate journal entries related to the investment during
2011.
2. What amount should Northwest report as its income from its investment
in Vancouver for the year ended December 31, 2011?
3. What amount should Northwest report in its balance sheet as its
investment in Vancouver?
4.
What should Northwest report in its statement of cash flows regarding its
investment in Vancouver?Please see the attachment for solution
File name P12-12 northwest paper
board.xlsx File type: xls PRICE: $8
