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  3. on 112015 choco paid 150000 to acquire 15 of the...

Question: on 112015 choco paid 150000 to acquire 15 of the...

Question details
  1. On 1/1/2015, Choco paid $150,000 to acquire 15% of the voting common stock of Cookie. Following is the financial information about Cookie.

Book value of assets

$450,000

Book value of liabilities

$125,000

Net income (2015)

$80,000

Dividends (2015)

$40,000

Fair market value of investment 1/1/2015

Fair market value of investment 12/31/2015

$160,000

$180,000

Cookie has a patent with book value of $5,000 but actually $25,000 with 8 years remaining life.

Q1: What method should be used to record this investment?

Q2: What is the balance of the investment account in Cookie at 12/31/2015?

Q3: What is the journal entry to record for dividends paid by Cookie?

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