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On July 1, 2024, Gupta Corporation bought 25% of the outstanding common stock of VB...

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Accounting

On July 1, 2024, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $138 million cash, giving Gupta the ability to exercise significant influence over VBs operations. At the date of acquisition of the stock, VBs net assets had a total fair value of $502 million and a book value of $258 million. Of the $244 million difference, $58 million was attributable to the appreciated value of inventory that was sold during the last half of 2024, $80 million was attributable to buildings that had a remaining depreciable life of 10 years, and $106 million related to equipment that had a remaining depreciable life of five years. Between July 1, 2024, and December 31, 2024, VB earned net income of $74 million and declared and paid cash dividends of $43 million.

Required:

Prepare all appropriate journal entries related to the investment during 2024, assuming Gupta accounts for this investment by the equity method.

Determine the amounts to be reported by Gupta.

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