On January 3, 2020, Novak Limited purchased 3,500 (35%) of the common shares of Sonja Corp. for $468,900. The following information is provided about the identifiable assets and liabilities of Sonja at the date of acquisition: Carrying Amount Fair Value Assets not subject to depreciation $516,000 $516,000 Assets subject to depreciation (10 years remaining) 806,000 866,000 Total identifiable assets 1,322,000 1,382,000 Liabilities 108,000 108,000 During 2020, Sonja reported the following information on its statement of comprehensive income: Income before discontinued operations $208,000 Discontinued operations (net of tax) (71,900) Net income and comprehensive income 136,100 Dividends declared and paid by Sonja November 15, 2020 124,000 Assume that the 35% interest is enough to make Sonja an associate of Novak, and that Novak is required to apply IFRS for its financial reporting. The fair value of Sonja’s shares at December 31, 2020, is $151 per share. Prepare the journal entry to record Novak’s purchase of the Sonja shares on January 3, 2020. (Hint: Any unexplained payment represents unrecognized goodwill of Sonja.) (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.) Date Account Titles and Explanation Debit Credit Jan. 3, 2020 enter an account title for the journal entry on January 3 enter a debit amount enter a credit amount enter an account title for the journal entry on January 3 enter a debit amount enter a credit amount
On January 3, 2020, Novak Limited purchased 3,500 (35%) of the common shares of Sonja Corp. for $468,900. The following information is provided about the identifiable assets and liabilities of Sonja at the date of acquisition: Carrying Amount Fair Value Assets not subject to depreciation $516,000 $516,000 Assets subject to depreciation (10 years remaining) 806,000 866,000 Total identifiable assets 1,322,000 1,382,000 Liabilities 108,000 108,000 During 2020, Sonja reported the following information on its statement of comprehensive income: Income before discontinued operations $208,000 Discontinued operations (net of tax) (71,900) Net income and comprehensive income 136,100 Dividends declared and paid by Sonja November 15, 2020 124,000 Assume that the 35% interest is enough to make Sonja an associate of Novak, and that Novak is required to apply IFRS for its financial reporting. The fair value of Sonja’s shares at December 31, 2020, is $151 per share. Prepare the journal entry to record Novak’s purchase of the Sonja shares on January 3, 2020. (Hint: Any unexplained payment represents unrecognized goodwill of Sonja.) (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.) Date Account Titles and Explanation Debit Credit Jan. 3, 2020 enter an account title for the journal entry on January 3 enter a debit amount enter a credit amount enter an account title for the journal entry on January 3 enter a debit amount enter a credit amount
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 19E
Related questions
Question
On January 3, 2020, Novak Limited purchased 3,500 (35%) of the common shares of Sonja Corp. for $468,900. The following information is provided about the identifiable assets and liabilities of Sonja at the date of acquisition:
During 2020, Sonja reported the following information on its statement of comprehensive income:
Assume that the 35% interest is enough to make Sonja an associate of Novak, and that Novak is required to apply IFRS for its financial reporting. The fair value of Sonja’s shares at December 31, 2020, is $151 per share.
Carrying Amount | Fair Value | |||||
---|---|---|---|---|---|---|
Assets not subject to depreciation
|
$516,000 | $516,000 | ||||
Assets subject to depreciation (10 years remaining)
|
806,000 | 866,000 | ||||
Total identifiable assets
|
1,322,000 | 1,382,000 | ||||
Liabilities
|
108,000 | 108,000 |
During 2020, Sonja reported the following information on its statement of comprehensive income:
Income before discontinued operations | $208,000 | ||
Discontinued operations (net of tax) | (71,900) | ||
Net income and comprehensive income | 136,100 | ||
Dividends declared and paid by Sonja November 15, 2020 | 124,000 |
Assume that the 35% interest is enough to make Sonja an associate of Novak, and that Novak is required to apply IFRS for its financial reporting. The fair value of Sonja’s shares at December 31, 2020, is $151 per share.
Prepare the journal entry to record Novak’s purchase of the Sonja shares on January 3, 2020. (Hint: Any unexplained payment represents unrecognized goodwill of Sonja.) (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.)
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
---|---|---|---|
Jan. 3, 2020
|
enter an account title for the journal entry on January 3
|
enter a debit amount
|
enter a credit amount
|
enter an account title for the journal entry on January 3
|
enter a debit amount
|
enter a credit amount
|
Prepare all necessary journal entries associated with Novak’s investment in Sonja for 2020. Depreciable assets are depreciated on a straight-line basis. (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.)
Account Titles and Explanation
|
Debit
|
Credit
|
---|---|---|
enter an account title to record dividends collected
|
enter a debit amount
|
enter a credit amount
|
enter an account title to record dividends collected
|
enter a debit amount
|
enter a credit amount
|
(To record dividends collected)
|
||
enter an account title to record investment income or loss
|
enter a debit amount
|
enter a credit amount
|
enter an account title to record investment income or loss
|
enter a debit amount
|
enter a credit amount
|
enter an account title to record investment income or loss
|
enter a debit amount
|
enter a credit amount
|
(To record investment income or loss)
|
||
enter an account title to record amortization of fair value difference
|
enter a debit amount
|
enter a credit amount
|
enter an account title to record amortization of fair value difference
|
enter a debit amount
|
enter a credit amount
|
(To record amortization of fair value difference)
|
Prepare the journal entry if you were informed that Novak’s long-term business prospects had deteriorated and that the most Novak could expect to recover in the future or to sell its investment in Sonja for at December 31, 2020, is $120 per share. (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.)
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
---|---|---|---|
Dec. 31, 2020
|
enter an account title for the journal entry on December 31
|
enter a debit amount
|
enter a credit amount
|
enter an account title for the journal entry on December 31
|
enter a debit amount
|
enter a credit amount
|
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 6 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Auditing: A Risk Based-Approach (MindTap Course L…
Accounting
ISBN:
9781337619455
Author:
Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Auditing: A Risk Based-Approach (MindTap Course L…
Accounting
ISBN:
9781337619455
Author:
Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:
Cengage Learning