Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring Company in March...
Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring Company in March 20X3. On December 31, 20X3, the officers of Slanted Building Supplies indicated they needed advice on whether to use the equity method or to carry the investment at fair value in reporting their ownership in Flat Flooring.
Why might the use of the equity method become more appropriate as the percentage of ownership increases?
Homework Answers
As per generally accepted accounting policies when investing company has significant influence over the investee company then the investor company should use equity method of accounting.
when a company (investing company) acquires or owns equity in between 20% to 50% of the total share in other company (investee company) then it i said that the investing company has significant influence over the investee company.
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Slanted Building Supplies purchased 32 percent of the voting
shares of Flat Flooring Company in March...
Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring Company in March...
Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring Company in March 20X3. On December 31, 20X3, the officers of Slanted Building Supplies indicated they needed advice on whether to use the equity method or to carry the investment at fair value in reporting their ownership in Flat Flooring. Why might the use of the equity method become more appropriate as the percentage of ownership increases?
Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring Company in March...
Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring Company in March 20X3. On December 31, 20X3, the officers of Slanted Building Supplies indicated they needed advice on whether to use the equity method or to carry the investment at fair value in reporting their ownership in Flat Flooring. a. What factors should be considered in determining whether equity-method reporting is appropriate? b. Which of the two approaches is likely to show the larger reported contribution...
On January 1, 2021, American Corporation purchased 30% of the outstanding voting shares of Short Supplies...
On January 1, 2021, American Corporation purchased 30% of the outstanding voting shares of Short Supplies common stock for $267.000 cash. On that date, Short's book value and fair value were both $890,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2021, was $85,000. During 2021, Short also paid cash dividends in the amount of $26.500. Required: Compute the amount that would be reported for the investment on American Corporation's financial statements...
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for...
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $109,200. At that date, the noncontrolling interest had a fair value of $46,800 and Soda reported $71,000 of common stock outstanding and retained earnings of $30,000. The differential is assigned to buildings and equipment, which had a fair value $20,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $35,000 higher than book value and a...
On January 1, 2013, Plano Company acquired 8 percent (28,000 shares) of the outstanding voting shares...
On January 1, 2013, Plano Company acquired 8 percent (28,000 shares) of the outstanding voting shares of the Sumter Company for $476,000, an amount equal to Sumter’s underlying book and fair value. Sumter declares and pays a cash dividend to its stockholders each year of $175,000 on September 15. Sumter reported net income of $350,000 in 2013, $421,200 in 2014, $469,400 in 2015, and $445,300 in 2016. Each income figure can be assumed to have been earned evenly throughout its...
On January 1, 2013, Plano Company acquired 8 percent (16,000 shares) of the outstanding voting shares...
On January 1, 2013, Plano Company acquired 8 percent (16,000 shares) of the outstanding voting shares of the Sumter Company for $192,000, an amount equal to Sumter’s underlying book and fair value. Sumter declares and pays a cash dividend to its stockholders each year of $100,000 on September 15. Sumter reported net income of $300,000 in 2013, $360,000 in 2014, $400,000 in 2015, and $380,000 in 2016. Each income figure can be assumed to have been earned evenly throughout its...
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for...
Pop Corporation acquired 70 percent of Soda Company's voting
common shares on January 1, 20X2, for $109,200. At that date, the
noncontrolling interest had a fair value of $46,800 and Soda
reported $71,000 of common stock outstanding and retained earnings
of $30,000. The differential is assigned to buildings and
equipment, which had a fair value $20,000 higher than book value
and a remaining 10-year life, and to patents, which had a fair
value $35,000 higher than book value and a...
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for...
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $118,300. At that date, the noncontrolling interest had a fair value of $50,700 and Soda reported $70,000 of common stock outstanding and retained earnings of $31,000. The differential is assigned to buildings and equipment, which had a fair value $24,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $44,000 higher than book value and a...
Wealthy Manufacturing Company purchased 30 percent of the voting shares of Diversified Products Corporation on March...
Wealthy Manufacturing Company purchased 30 percent of the voting shares of Diversified Products Corporation on March 23, 20X4 On December 31, 20X8, Wealthy Manufacturing's controller attempted to prepare income statements and retained earnings statements for the two companies using the following summarized 20X8 data Net Sales Cost of Goods Sold Other Expenses Dividends Declared& Paid Retained Eamings, 1/1/X8 Wealthy Manufacturing $851, 000 669, 000 105, 000 39, 000 428, 000 Diversified Products $414, 000 314, 000 35, 000 19, 000...
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for...
Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $112,700. At that date, the noncontrolling interest had a fair value of $48,300 and Soda reported $71,000 of common stock outstanding and retained earnings of $31,000. The differential is assigned to buildings and equipment, which had a fair value $28,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $31,000 higher than book value and a...
On January 1, 2021, American Corporation purchased 30% of the outstanding voting shares of Short Supplies common stock for $267.000 cash. On that date, Short's book value and fair value were both $890,000. The equity method is deemed appropriate for this investment. Short's net income reported on December 31, 2021, was $85,000. During 2021, Short also paid cash dividends in the amount of $26.500. Required: Compute the amount that would be reported for the investment on American Corporation's financial statements...
Pop Corporation acquired 70 percent of Soda Company's voting
common shares on January 1, 20X2, for $109,200. At that date, the
noncontrolling interest had a fair value of $46,800 and Soda
reported $71,000 of common stock outstanding and retained earnings
of $30,000. The differential is assigned to buildings and
equipment, which had a fair value $20,000 higher than book value
and a remaining 10-year life, and to patents, which had a fair
value $35,000 higher than book value and a...
Wealthy Manufacturing Company purchased 30 percent of the voting shares of Diversified Products Corporation on March 23, 20X4 On December 31, 20X8, Wealthy Manufacturing's controller attempted to prepare income statements and retained earnings statements for the two companies using the following summarized 20X8 data Net Sales Cost of Goods Sold Other Expenses Dividends Declared& Paid Retained Eamings, 1/1/X8 Wealthy Manufacturing $851, 000 669, 000 105, 000 39, 000 428, 000 Diversified Products $414, 000 314, 000 35, 000 19, 000...
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