Calculate income and investment balance allocation of excess to undervalued assets
Dok Company acquired a 30 percent interest in Oak on January 1 for $2,000,000 cash. Assume the cost of the investment equals the fair value of Oak’s net assets. Dok assigned the $500,000 fair value over book value of the interest acquired to the following assets:
|
Inventories |
$100,000 (sold in the current year) |
|
Building |
$200,000 (4 year remaining life at January 1) |
|
Goodwill |
$200,000 |
During the year Oak reported net income of $800,000 and paid $200,000 dividends.
REQUIRED
1. Determine Dok’s income from Oak.
2. Determine the December 31 balance of the Investment in Oak account.