2. Accounting
3. james acquired 40 of the outstanding voting shares of schott...

# Question: james acquired 40 of the outstanding voting shares of schott...

###### Question details

James acquired 40% of the outstanding voting shares of Schott Co. on January 1, 2015 for $210,000 in cash when Schott’s owners’ equity was$400,000. One of the company’s buildings, that had a 20-year remaining life, was worth $100,000, even though its net book value was$60,000. Schott also had an unrecorded patent having a value of $85,000 that had a 10-year life. In 2015, Schott recorded net income of$60,000 and distributed a total cash dividend of $12,000. Its fortunes changed in 2016 when it recorded a$40,000 net loss, but the Board still paid $10,000 in dividends. This was a strategic investment and James began purchasing inventory from Schott right away. In 2015, Schott sold inventory with an original cost of$60,000 to James for $90,000. James had$15,000 of these goods in inventory (at the selling price) at December 31, 2015, but it was all sold in 2016. In 2016, Schott sold another \$80,000 of inventory to James and had a gross profit on the sale of 37.5%. All but 30% of this was sold to third parties during the year.

Required: 1. Record the entries James needs in 2015 and 2016 in conjunction with this investment. 2. What is the balance in the investment account at December 31, 2016?