On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the...
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the open market in exchange for $14,100. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $96,500.
During the next two years, the following information is available for Zip Company:
| Income | Dividends Declared | Common Stock Fair Value (12/31) |
|
| 2016 | $327,000 | ||
| 2017 | $82,000 | $6,600 | 386,000 |
| 2018 | 86,000 | 15,900 | 475,000 |
At December 31, 2017, Zip reports a net book value of $292,000. Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2017.
-
Assume Akron applies the equity method to its Investment in Zip account:
- What amount of equity income should Akron report for 2018?
- On Akron's December 31, 2018, balance sheet, what amount is reported for the Investment in Zip account?
-
Assume Akron uses fair-value accounting for its Investment in Zip account:
- What amount of income from its investment in Zip should Akron report for 2018?
- On Akron's December 31, 2018, balance sheet, what amount is reported for the Investment in Zip account?
Homework Answers
1) Allocation and annual amortization on Dec 31, 2017.
| Particulars | Amount($) |
| Purchase price of 25% interest | 96500 |
| Carrying amount of 5% interest ($386000*5%) | 19300 |
| Total fair value ($96500+$19300) | 115800 |
| Net book value ($292000*30%) | (87600) |
| Franchise Agreements ($115800-$87600) | 28200 |
| Remaining life of franchise agreements | 10 years |
| Annual Amortization ($28200/10 years) | 2820 |
a) Equity Income of 2018 :-
| Particulars | Amount($) |
| Equity Income Accrual in 2018 ($86000*30%) | 25800 |
| Less : Amortization in 2018 (Calculate Above) | (2820) |
| Equity Income of 2018 | 22980 |
b) Investment in Zip Account :-
| Particulars | Amount($) |
| Total Fair value in Dec 31, 2017 | 115800 |
| Equity Income in 2018 | 22980 |
| Less : Dividend of 2018 ($15900*30%) | (4770) |
| Investment in Zip | 134010 |
2)a. Income from Investment in Zip ;-
| Particulars | Amount($) |
| Dividend Income ($15900*30%) | 4770 |
| Add : Increase in fair value (($475000-$386000)*30%) | 26700 |
| Total Income from Investment in Zip | 31470 |
b. Investment in Zip ;-
= $475000*30%
= $142500
Add Answer to:
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip
Company's common shares on the...
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the...
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the open market in exchange for $16,800. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $96,250. During the next two years, the following information is available for Zip Company: Income Dividends Declared Common Stock Fair Value (12/31) 2016 $322,000 2017 $81,000 $6,300 385,000 2018 92,000 14,700 479,000 At December 31, 2017, Zip reports a net...
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the...
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the open market in exchange for $16,800. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $97,000. During the next two years, the following information is available for Zip Company: Income Dividends Declared Common Stock Fair Value (12/31) 2016 $324,000 2017 $70,000 $7,100 388,000 2018 82,000 14,200 481,000 At December 31, 2017, Zip reports a net...
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the...
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the open market in exchange for $17,100. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $95,000. During the next two years, the following information is available for Zip Company: Income Dividends Declared Common Stock Fair Value (12/31) 2016 $313,000 2017 $68,000 $6,600 380,000 2018 85,000 14,400 470,000 At December 31, 2017, Zip reports a net...
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the...
On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip Company's common shares on the open market in exchange for $15,400. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $93,500. During the next two years, the following information is available for Zip Company: Income Dividends Declared Common Stock Fair Value (12/31) 2016 $313,000 2017 $70,000 $7,800 374,000 2018 90,000 15,100 476,000 At December 31, 2017, Zip reports a net...
On December 31, 2016, Akron purchased 5 Percent of Zip's common shares on the open market...
On December 31, 2016, Akron purchased 5 Percent of Zip's common shares on the open market in exchange for $24,000. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $99,000. During the next two years, the following information is available for Zip Company: Income Dividends 2016 2017 2018 Common Stock Fair Value (12/31) $480,000 396,000 499,000 77,000 91,800 7,300 15,600 At December 31, 2017, Zip reports a net book value of...
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $364,000....
On January 1, 2016, Aspen Company acquired 80 percent of Birch
Company's voting stock for $364,000. Birch reported a $320,000 book
value and the fair value of the noncontrolling interest was $91,000
on that date. Then, on January 1, 2017, Birch acquired 80 percent
of Cedar Company for $108,000 when Cedar had a $108,000 book value
and the 20 percent noncontrolling interest was valued at $27,000.
In each acquisition, the subsidiary's excess acquisition-date fair
over book value was assigned to...
On January 1, 2016, Halstead, Inc., purchased 79,000 shares of Sedgwick Company common stock for $1,452,000,...
On January 1, 2016, Halstead, Inc., purchased 79,000 shares of Sedgwick Company common stock for $1,452,000, giving Halstead 25 percent ownership and the ability to apply significant influence over Sedgwick. Any excess of cost over book value acquired was attributed solely to goodwill. Sedgwick reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout these years. Dividends are declared and paid in the same period. 2016 2017 2018 Net Income $386,000 496,000 600,000 Annual...
On January 1, 2020, Allan acquires 8 percent of Bellevue’s outstanding common stock for $41,110. Allan...
On January 1, 2020, Allan acquires 8 percent of Bellevue’s outstanding common stock for $41,110. Allan classifies the investment as an available-for-sale security and records any unrealized holding gains or losses directly in owners’ equity. On January 1, 2021, Allan buys an additional 13 percent of Bellevue for $54,560, providing Allan the ability to significantly influence Bellevue’s decisions. During the next two years, the following information is available for Bellevue: Income Dividends Common stock fair value (12/31) 2020 $70,000 $30,000...
2. On January 1, 2020, Allan acquires 9 percent of Bellevue's outstanding common stock for $40,000....
2. On January 1, 2020, Allan acquires 9 percent of Bellevue's outstanding common stock for $40,000. Allan classifies the investment as an available-for-sale security and records any unrealized holding gains or losses directly in owners' equity. On January 1, 2021, Allan buys an additional 13 percent of Bellevue for $54,600, providing Allan the ability to significantly influence Bellevue's decisions. During the next two years, the following information is available for Bellevue: Income Dividends Common stock fair value (12/31) 2020 2021...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company...
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,277,500 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $1,500,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $315,000. On January 1, 2018, Palka acquired an additional...
On December 31, 2016, Akron purchased 5 Percent of Zip's common shares on the open market in exchange for $24,000. On December 31, 2017, Akron, Inc., acquires an additional 25 percent of Zip Company's outstanding common stock for $99,000. During the next two years, the following information is available for Zip Company: Income Dividends 2016 2017 2018 Common Stock Fair Value (12/31) $480,000 396,000 499,000 77,000 91,800 7,300 15,600 At December 31, 2017, Zip reports a net book value of...
On January 1, 2016, Aspen Company acquired 80 percent of Birch
Company's voting stock for $364,000. Birch reported a $320,000 book
value and the fair value of the noncontrolling interest was $91,000
on that date. Then, on January 1, 2017, Birch acquired 80 percent
of Cedar Company for $108,000 when Cedar had a $108,000 book value
and the 20 percent noncontrolling interest was valued at $27,000.
In each acquisition, the subsidiary's excess acquisition-date fair
over book value was assigned to...
On January 1, 2016, Halstead, Inc., purchased 79,000 shares of Sedgwick Company common stock for $1,452,000, giving Halstead 25 percent ownership and the ability to apply significant influence over Sedgwick. Any excess of cost over book value acquired was attributed solely to goodwill. Sedgwick reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout these years. Dividends are declared and paid in the same period. 2016 2017 2018 Net Income $386,000 496,000 600,000 Annual...
2. On January 1, 2020, Allan acquires 9 percent of Bellevue's outstanding common stock for $40,000. Allan classifies the investment as an available-for-sale security and records any unrealized holding gains or losses directly in owners' equity. On January 1, 2021, Allan buys an additional 13 percent of Bellevue for $54,600, providing Allan the ability to significantly influence Bellevue's decisions. During the next two years, the following information is available for Bellevue: Income Dividends Common stock fair value (12/31) 2020 2021...
Most questions answered within 3 hours.
-
) Assume that in the market for widgets, demand is highly
elastic compared to supply. If...
asked 2 minutes ago -
Why is a personal interview the most important step in the sales
selection process? What are...
asked 13 minutes ago -
In Python rOverlap (x1, y1, w1, h1, x2, y2, w2, h2) A rectangle
is axis-aligned if...
asked 13 minutes ago -
If we observe in a protein solution that DNA is causing a
mixture 260/280 ratio ~0.9,...
asked 23 minutes ago -
Explain the steps involved in making cDNA from mRNA, and how you
would create a cDNA...
asked 23 minutes ago -
A beta (β) particle is described by which of the following?
Select the correct answer below:...
asked 26 minutes ago -
A new machine costs $150,000, lasts 10 years, has an annual
O&M cost of $50,000, and...
asked 29 minutes ago -
A newspaper in a large Midwestern city reported that the
National Association of Realtors said that...
asked 31 minutes ago -
1. Develop a use case diagram for the bank case study described
in Chapter 1. 2....
asked 41 minutes ago -
The phylum Protista has often been referred to as a junk drawer
of classification. Explain what...
asked 48 minutes ago -
The average amount of money spent for lunch per person in the
college cafeteria is $7.09...
asked 50 minutes ago -
You follow the lab procedure and at the end of Part 4C, you used
an average...
asked 1 hour ago