Answers given for all. Can you explain each with formulas. 23. On January 1, 2019,...
Answers given for all. Can you explain each with formulas.
23. On January 1, 2019, Windy Meadows Corp. acquired a 10% interest in Jones Enterprises for $20,000. The stock has a readily determinable fair value, so the investor measures the Equity Investment at fair value with all unrealized gains and losses flowing through net income. On December 31, 2019 the fair value of the 10% common stock investment is $24,000.
On April 1, 2020, Windy Meadows acquired an additional 20% Jones's common stock for $52,000 and gains the ability to exert significant influence over its investment and will begin to use the equity method for its investment.
What is the amount of the unrealized holding gain or loss that would be required on January 1, 2020? to appropriately transition to the equity method?
b. $ 2,000
Answer: b
24) Spring Valley Corp. purchased a 40% interest in A1 Automotive Company on July 1, 2020. On September 23, 2020, A1 Automotive paid dividends of $50,000 to its common stockholders. The investee reported 2020 net income of $150,000, which was earned evenly throughout the year.
What amount of Equity Income should Spring Valley report in its 2020 income statement?
b. $30,000
Answer: b
25) Investor owns 30% of Investee and applies the equity method. In 2020, Investor sells merchandise costing $240,000 to Investee for $300,000. Investee's ending inventory includes $50,000 purchased from Investor.
What amount of unrealized gross profit must be deferred in the equity method entry?
a. $ 3,000
Answer: a
26) Assume the facts in Question 29. Which of the following is the correct equity method entry to defer the unrealized gross profit?
a. Equity Income 3,000
Equity Investment 3,000
answer: a
Homework Answers
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Answers given for all. Can you
explain each with formulas.
23.
On January 1, 2019,...
Question 18-20 are based off this sane chart 2019 2018 2017 (At December 31) Current assets...
Question 18-20 are based off this sane chart
2019 2018 2017 (At December 31) Current assets Tangible fixed assets Intangible assets. Total assets.. $285,000 662,500 40.000 $987,500 $277.500 575,000 45,000 $897.500 $207.000 563.000 50,000 $320,000 Current liabilities Noncurrent liabilities Common stock Additional pald-in capital Retained earnings Stockholders' equity Total liabilities and equity $120,000 266,250 100,000 100,000 400,000 600,000 $110,000 242,500 100,000 100.000 345,000 545,000 $897500 $100,000 220,000 100,000 100,000 300,000 500,000 $820,000 $986250 2012 2018 (For the years ended December...
(At December 31) 2019 2018 2017 Current assets Tangible fixed assets Intangible assets. Total assets.... $285,000...
(At December 31) 2019 2018 2017 Current assets Tangible fixed assets Intangible assets. Total assets.... $285,000 662,500 40,000 $987,500 $277,500 575,000 45,000 $897,500 $207,000 563,000 50,000 $820,000 Current liabilities.. Noncurrent liabilities. Common stock. Additional paid-in capital. Retained earnings Stockholders' equity Total liabilities and equity $120,000 266,250 100,000 100,000 400,000 600,000 $986,250 $110,000 242,500 100,000 100,000 345,000 545,000 $897,500 $100,000 220,000 100,000 100,000 300,000 500,000 $820,000 2019 2018 2017 (For the years ended December 31) Revenues Expenses .. Net income $970,000...
Use the following facts for Multiple Choice problems 38 and 39: Assume on January 1, 2019,...
Use the following facts for Multiple Choice problems 38 and 39: Assume on January 1, 2019, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2019, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventories Land.. Property & equipment, net Total assets. $ 100,000 200,000 225,000 $ 525,000 $ 50.000 +10 80,000 - 5...
Answers given. Can you explain why, with formulas. 1) On January 2, 2020, Maddison Company purchased...
Answers given. Can you explain why, with formulas. 1) On January 2, 2020, Maddison Company purchased 35% of the outstanding common stock of Ellinger, Inc. and subsequently used the equity method to account for the investment. During 2020 Ellinger, Inc. reported net income of $400,000 and distributed dividends of $100,000. The ending balance in the Investment in Ellinger, Inc. account at December 31, 2020 was $500,000 after applying the equity method during 2020. What was the purchase price Maddison paid...
Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common...
Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2013, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventaries $150,000 $75,000 Land 300,000 150,000 Property & equipment 337,500 150,000 Total assets $787,500 $375,000 Liabilities $225,000 $120,000 Common stock ($2 par) 30,000 15,000 Additional paid-in capital 420,000 225,000 Retained...
Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common...
Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2013, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventories $100,000 $50,000 Land 200,000 100.000 Property & equipment 225.000 100.000 Total assets $525,000 $250,000 Liabilities $150,000 $80,000 Common stock ($2 par) 20,000 10,000 Additional paid-in capital 280.000 150.000 Retained...
Question 26 (1 point) Which of the following is not true when the fair value option...
Question 26 (1 point) Which of the following is not true when the fair value option is elected for an investment that would normally be accounted for under the equity method? No journal entry need be made to recognize the investor's portion of the investee's net income. Unrealized holding gains and losses on that investment are recognized in net income. No journal entry need be made to recognize the investor's portion of dividends paid by the investee. All of these...
On January 1, Year 1. Investor, Inc. acquired 40% of the outstanding common stock of Investee...
On January 1, Year 1. Investor, Inc. acquired 40% of the outstanding common stock of Investee Co, for $530,000. Investee's net assets on that date totaled $1.2 million. Any excess of cost over book value is attributable to a trade name with a 20-year remaining life. Investee immediately began supplying inventory to Investor as follows: Year Year Year 2 Transfer Price $100,000 $150,000 Cost to Investec $70,000 $96,000 Amount Held by Investor at Year-End (at Transfer Price) $25,000 $45,000 Inventory...
SHOW ALL WORKINGS The Investor acquired 75% of Investee on January 1, 2020 for $105,000. At...
SHOW ALL WORKINGS
The Investor acquired 75% of Investee on January 1, 2020 for
$105,000. At acquisition the fair value of the noncontrolling
interest was $35,000. Trial Balances for the two entities at
December 21, 2020 are:
Required The book value of the investee's assets are equal to
the fair value except for Building & Equipment which are worth
$25,000 more. Building and Equipment have 10 years of remaining
life at time of acquisition
1. Allocation of Acquisition Value
2....
On January 1, 20X7, Poke Corporation acquired 25 percent of the outstanding shares of Shove Corporation...
On January 1, 20X7, Poke Corporation acquired 25 percent of the outstanding shares of Shove Corporation for $100,000 cash. Shove Company reported net income of $75,000 and paid dividends of $30,000 for both 20X7 and 20X8. The fair value of shares held by Poke was $110,000 and $105,000 on December 31, 20X7 and 20X8 respectively. If Poke could not exercise significant influence over the investee, by what amount will Poke's 20X7 income increase due to its investment in Shove? a)...
Question 18-20 are based off this sane chart
2019 2018 2017 (At December 31) Current assets Tangible fixed assets Intangible assets. Total assets.. $285,000 662,500 40.000 $987,500 $277.500 575,000 45,000 $897.500 $207.000 563.000 50,000 $320,000 Current liabilities Noncurrent liabilities Common stock Additional pald-in capital Retained earnings Stockholders' equity Total liabilities and equity $120,000 266,250 100,000 100,000 400,000 600,000 $110,000 242,500 100,000 100.000 345,000 545,000 $897500 $100,000 220,000 100,000 100,000 300,000 500,000 $820,000 $986250 2012 2018 (For the years ended December...
(At December 31) 2019 2018 2017 Current assets Tangible fixed assets Intangible assets. Total assets.... $285,000 662,500 40,000 $987,500 $277,500 575,000 45,000 $897,500 $207,000 563,000 50,000 $820,000 Current liabilities.. Noncurrent liabilities. Common stock. Additional paid-in capital. Retained earnings Stockholders' equity Total liabilities and equity $120,000 266,250 100,000 100,000 400,000 600,000 $986,250 $110,000 242,500 100,000 100,000 345,000 545,000 $897,500 $100,000 220,000 100,000 100,000 300,000 500,000 $820,000 2019 2018 2017 (For the years ended December 31) Revenues Expenses .. Net income $970,000...
Use the following facts for Multiple Choice problems 38 and 39: Assume on January 1, 2019, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2019, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventories Land.. Property & equipment, net Total assets. $ 100,000 200,000 225,000 $ 525,000 $ 50.000 +10 80,000 - 5...
Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2013, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventaries $150,000 $75,000 Land 300,000 150,000 Property & equipment 337,500 150,000 Total assets $787,500 $375,000 Liabilities $225,000 $120,000 Common stock ($2 par) 30,000 15,000 Additional paid-in capital 420,000 225,000 Retained...
Assume that on January 1, 2013, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2013, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventories $100,000 $50,000 Land 200,000 100.000 Property & equipment 225.000 100.000 Total assets $525,000 $250,000 Liabilities $150,000 $80,000 Common stock ($2 par) 20,000 10,000 Additional paid-in capital 280.000 150.000 Retained...
Question 26 (1 point) Which of the following is not true when the fair value option is elected for an investment that would normally be accounted for under the equity method? No journal entry need be made to recognize the investor's portion of the investee's net income. Unrealized holding gains and losses on that investment are recognized in net income. No journal entry need be made to recognize the investor's portion of dividends paid by the investee. All of these...
On January 1, Year 1. Investor, Inc. acquired 40% of the outstanding common stock of Investee Co, for $530,000. Investee's net assets on that date totaled $1.2 million. Any excess of cost over book value is attributable to a trade name with a 20-year remaining life. Investee immediately began supplying inventory to Investor as follows: Year Year Year 2 Transfer Price $100,000 $150,000 Cost to Investec $70,000 $96,000 Amount Held by Investor at Year-End (at Transfer Price) $25,000 $45,000 Inventory...
SHOW ALL WORKINGS
The Investor acquired 75% of Investee on January 1, 2020 for
$105,000. At acquisition the fair value of the noncontrolling
interest was $35,000. Trial Balances for the two entities at
December 21, 2020 are:
Required The book value of the investee's assets are equal to
the fair value except for Building & Equipment which are worth
$25,000 more. Building and Equipment have 10 years of remaining
life at time of acquisition
1. Allocation of Acquisition Value
2....
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