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Combination Envire CFC Book Value Book Value $65,000 $25,000 72,000 20,000 33,000 45,000 400,000 150,000 $90,000 94,000 88,00

25. Based on the information provided, what amount of income will be reported by Wheeley from its investment in Twain for the year 2007?
A. $22,400
B. $11,800
C. $4,800
D. $12,400

*I know the answer is $11800 but if you can please show computations for that answer.

26. Based on the information provided, what will be the balance in the investment account on December 31, 2007 reported by Wheeley?
A. $172,000
B. $173,800
C. $183,800
D. $194,400

*I know the answer is $173800 but if you can please show computations for that answer.

On January 1, 2007, Rotor Corporation acquired 30 percent of Stator Company's stock for $150,000. On the acquisition date, Stator reported net assets of $450,000 valued at historical cost and $500,000 stated at fair value. The difference was due to the increased value of buildings with a remaining life of 15 years. During 2007 and 2008 Stator reported net income of $25,000 and $15,000 and paid dividends of $10,000 and $12,000, respectively. Rotor uses the equity method.

6. Based on the preceding information, had Rotor Corporation used the cost method, what would have been the balance in the investment account on Dec 31, 2008?
A. $150,000
B. $157,500
C. $153,400
D. $153,500

*I know the answer is $150,000 but if you can please show computations for that answer.

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Answer #1

Q.25 & Q26. The question asked is based on Wheeley & Twain. However the data provided is of Envire and CFC. So kindly provide the data of Wheeley & Twain.

Q. 6. The cost method mandates that the investment be booked at its historical cost, which in this case is $150,000. The $150,000 will appear as an asset on the balance sheet. Generally the amount paid to subsidiary is equal to Investment.

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