Homework Answers
Solution:
Halstead
Inc.
| Particulars | Amount ($) |
| Equity Method Income Accrual (2018) | |
| (25%*617,000*1/2 year) | $77,125 |
| (21%*617,000*1/2 year) | $64,785 |
| Total Income Accrual | $141,910 |
| Gain on sale (Working Note) | $91,218 |
| Total Effect on income | $233,128 |
Working
Note:
Cost of acquisition = $1,499,000
2016 Income accrual (366,000*25%) = $91,500
2016 dividend (122,000*25%) = ($30,500)
2017 Income accrual (411,000*25%) = $102,750
2017 dividend (128,000*25%) = ($32,000)
2018 Income accrual (617,000*25%*1/2) = $77,125
2018 dividend (167,000*25%*1/2) = ($20,875)
Book value of 77,125 shares as on July 1, 2018 =
$1,687,000
Cash proceeds from sale (12,800*29) = $371,200
Less: Book value of shares sold (1,687,000/77,125)*12,800 =
$279,982
Gain on Sale = $91,218
Add Answer to:
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On January 1, 2017, Ridge Road Company acquired 30 percent of the voting shares of Sauk Trail, Inc., for $4,400,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridae Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board which gave it the ability to significantly influence Sauk Trail's operating...
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