Investment in Common Stock—Fair Market Value Less than Book Value
JJJ Inc. purchased 35% of ABC Co. on January 4, 2008, for $280,000 when ABC’s book value was $810,000. On that day, the market value of the net assets of ABC equaled their book values with the following exceptions:
|
Book |
Market |
|
|
Equipment |
$175,000 |
$140,000 |
|
Buildings |
40,000 |
65,000 |
The equipment has a remaining useful life of 10 years, and the building has a remaining useful life of 20 years. ABC reported the following related to operations for 2008 and 2009:
|
Net Income (Loss) |
Dividends |
|
|
2008 |
$ 80,000 |
$15,000 |
|
2009 |
(10,000) |
8,000 |
Instructions: Provide the entries made by JJJ Inc. relating to its investment in ABC for the years 2008 and 2009.