Question - On January 1, 2011, the Travis Corporation purchased a 22% in Scott Company by procuring 5000 shares of the 25,000 outstanding shares of common stock. The acquisition price was $32.50 a share. On the date of this procurement, Scott Company's net assets were defined as the following:
Non-depreciated current assets: Book value-$65,000, Fair value-$73,000, Difference-$8,000
Depreciable assets: Book value-$163,000, Fair value-$178,000, Difference-$15,000
TOTAL Assets: Book value $228,000, Fair value $251,000, Difference $23,000.
The total liabilities has a book and fair value of $90,000.
During 2011, Scott Company had earned income of $76,000 and paid dividends of $16,000. The depreciated items have a useful life of 5 years remaining and no residual value.
Prepare all the necessary journal entries on Travis's books to record the acquisition and the events subsequent to the initial investments.