RUNNING HEAD: Week 4 Assignment 1
Week 4 Assignment
Megan Jorcke
Ashford University
ACC 612: Advanced Financial Accounting
Professor Majors
14 October 2019
Week 4 Assignment 2
Ex. 4-2 (Power Corp)
Power Corporation purchased 100 percent of the common stock of Snow Corporation on January
1, 20X2, by issuing 45,000 shares of its $6 par value common stock. The market price of
Power’s shares at the date of issue was $24. Snow reported net assets with a book value of
$980,000 on that date. The amount paid in excess of the book value of Snow’s net assets was
attributed to the increased value of patents held by Snow with a remaining useful life of eight
years. Snow reported net income of $56,000 and paid dividends of $20,000 in 20X2 and reported
a net loss of $44,000 and paid dividends of $10,000 in 20X3.
Assuming that Power Corporation uses the equity-method in accounting for its investment in
Snow Corporation, prepare all journal entries for Power for 20X2 and 20X3.
Investment in Snow Corporation $1,080,000
Common Stock 270,000
Paid in Capital in Excess of Par 810,000
Investment in Snow Corporation $56,000
Income from Investee 56,000
Cash $20,000
Investment in Snow Corporation 20,000
Income from Investee $12,500
Investment in Snow Corporation 12,500
Income from Investee $44,000
Investment in Snow Corporation 44,000
Cash $10,000
Investment in Snow Corporation $10,000
Income from Investee $12,500
Investments in S Corporation 12,500
Ex. 4-3 (Best Corp)
Best Corporation acquired 100 percent of the voting common stock of Flair Company on January
1, 20X7, by issuing bonds with a par value and fair value of $670,000 and making a cash
payment of $24,000. At the date of acquisition, Flair reported assets of $740,000 and liabilities
of $140,000. The book values and fair values of Flair’s net assets were equal except for land and
Week 4 Assignment 3
copyrights. Flair’s land had a fair value of $16,000 greater than its book value. All of the
remaining purchase price was attributed to the increased value of Flair’s copyrights with a
remaining useful life of eight years. Flair Company reported a loss of $88,000 in 20X7 and net
income of $120,000 in 20X8. Flair paid dividends of $24,000 each year.
Assuming that Best Corporation uses the equity method in accounting for its investment in Flair
Company, prepare all journal entries for Best or20X7 and 20X8
Investment in Flair Company 694,000
Cash 24,000
Bonds Payable 670,000
Cash 24,000
Investment in Flair Company 24,000
Income from Flair Company 88,000
