ZuoTi.Pro
Question

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 for its investment in Ellinger? c. $395,000

2) Francis, Inc. acquired 40% of Park's voting stock on January 1, 2020 for $420,000. During 2020, Park earned $120,000 and paid dividends of $60,000. During 2021, Park earned $160,000 and paid dividends of $50,000 on April 1 and $40,000 on December 1. On July 1, 2021, Francis sold half of its stock in Park for $275,000 cash.

What is the gain on sale of the investment if income was earned evenly throughout 2021? c. $ 47,000

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1
As per Equity Method Net Income increases the investment and dividend reduces the investment
Investment in Ellinger, Inc. Dec 31, 2020 $500,000
Net Income (400000*35%) -140000
Dividend (100000*35%) 35000
Investment in Ellinger, Inc. Jan 2, 2020 $395,000
Investment in Park, Jan 1, 2020 $420,000
Net Income (120000*40%) 48000
Dividend (60000*40%) -24000
Investment in Park, Dec 31, 2020 $444,000
Investment in Park, Jan 1, 2021 $444,000
Net Income (160000/2*40%) 32000
Dividend (50000*40%) -20000
Investment in Park, April 1, 2020 (1) $456,000
Selling Price of 20% Investment in Park $275,000
Cost Price of 20% Investment in Park (1)*(50%) $228,000
Profit on Sale $47,000
1 0
Add a comment
Know the answer?
Add Answer to:
Answers given. Can you explain why, with formulas. 1) On January 2, 2020, Maddison Company purchased...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 3. Potter, Inc., acquires 10% of Weasley Corporation on January 1, 2020, for $300,000. During 2020,...

    3. Potter, Inc., acquires 10% of Weasley Corporation on January 1, 2020, for $300,000. During 2020, Weasley reported net income of $250,000 and paid total dividends of $50,000. On January 1, 2021, Potter purchased an additional 30% of Weasley for $900,000. During 2021, Weasley reported net income of $420,000 and paid dividends of $20,000. Required: a. Prepare the January 1, 2021 entry to adjust the equity investment account for the initial adoption of the Equity Method. b. Compute the balance...

  • On January 1, 2021 ABC purchased 30% of the outstanding common stock of XYZ and subsequently...

    On January 1, 2021 ABC purchased 30% of the outstanding common stock of XYZ and subsequently used the equity method to account for the investment. During 2021, XYZ reported net income of $1,200,000 and distributed total dividends of $500,000. The ending balance of the investment in XYZ at December 31, 2021 was $1,000,000 after applying the equity method during 2021. What was the initial purchase price ABC paid for its investment in XYZ?

  • On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...

    On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,050,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $810,000, retained earnings of $360,000, and a noncontrolling interest fair value of $450,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year remaining life. Corgan uses the equity method to account for its investment in Smashing....

  • 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...

  • On January 2, 2018 Pod Company purchased 25% of the outstanding common stock of Jobs, Inc....

    On January 2, 2018 Pod Company purchased 25% of the outstanding common stock of Jobs, Inc. and subsequently used the equity method to account for the investment. During 2018 Jobs, Inc. reported net income of $1,260,000 and distributed dividends of $540,000. The ending balance in the Investment in Pod Company account at December 31, 2018 was $960,000 after applying the equity method during 2018. What was the purchase price Pod Company paid for its investment in Jobs, Inc? Select one:...

  • Rogers, Inc., acquires 15% of Procter Corporation on January 1, 2020, for $70,000. During 2020, Procter...

    Rogers, Inc., acquires 15% of Procter Corporation on January 1, 2020, for $70,000. During 2020, Procter reported net income of $180,000 and paid total dividends of $40,000. At the year end of 2020, the market value of this 15% investment indicates the value of $68,000. On January 1, 2021, Rogers purchased an additional 30% of Procter for $310,000. During 2021, Procter reported net income of $300,000 and paid dividends of $40,000. a. Prepare the January 1, 2021 entry to adjust...

  • Rogers, Inc., acquires 15% of Procter Corporation on January 1, 2020, for $70,000. During 2020, Procter...

    Rogers, Inc., acquires 15% of Procter Corporation on January 1, 2020, for $70,000. During 2020, Procter reported net income of $180,000 and paid total dividends of $40,000. At the year end of 2020, the market value of this 15% investment indicates the value of $68,000. On January 1, 2021, Rogers purchased an additional 30% of Procter for $310,000. During 2021, Procter reported net income of $300,000 and paid dividends of $40,000. a.   Prepare the January 1, 2021 entry to adjust...

  • 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, 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...

  • Park Corporation acquired the voting stock of Sequoia Company on January 1, 2020 for $25 million...

    Park Corporation acquired the voting stock of Sequoia Company on January 1, 2020 for $25 million in cash and stock. At the date of acquisition, Sequoia's book value totaled $3 million, consisting of $1.6 million in capital stock, $1.8 million in retained earnings, and $400,000 in accumulated other comprehensive losses. Sequoia's reported net assets at the date of acquisition were carried at amounts approximating fair value, except its inventory was overvalued by $500,000 (sold in 2020), its plant assets (10-year...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT