Equity Investments, Equity Method, Net Assets Not Equal to Market Value. Smart Cookie Corporation purchased 40% of the 320,000 outstanding shares of JT’s Fine Foods, Inc. on January 1 of the current year. Smart Cookie acquired the shares at a price of $3.20 per share. The following additional data were available for JT’s Fine Foods, Inc. on the date of acquisition
JT’s Fine Foods, Inc. reported net income of $64,000 at the end of the current year and declared and paid cash dividends of $25,600 during the current year.
a. Compute the amount of goodwill implied on Smart Cookie’s acquisition of JT’s Fine Foods shares.
b. Prepare all journal entries necessary to account for this investment in JT’s under the equity method
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