# S House Inc.: Case Study

The M Industries is holding 30% of share holding of S House Inc. which means the company has significant influence over the financial and operating policies of the S House Inc. therefore the M Industries should record the investment related transactions on equity

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The journal entry for recording depreciation on investment on shares is as under:

31st Dec. 2013 Investment Revenue $1 million Investment in S House Shares $1 million (The depreciation on investment recorded)

The increase in fair value is calculated as under:

The fair value of net assets of S House’s Inc. is $20 million excess than the book value of net assets which is $90 million. Therefore the fair value of net assets of S House’s Inc. is $110 million.

The M Industries purchased 30% of net assets therefore the fair value of net assets purchased by M Inc. would be 30% of $110.

The difference between cost of net assets and fair value of net assets is goodwill of $15 and the difference between fair value of net assets of $33 and book value of net assets to M Industries of $27 is undervaluation of assets which is $6.

There will be no entry for increase in fair value of