Homework Answers
| a. | Equity income 2017 | $56,325 | |
| Equity income 2018 | $73,125 | ||
| b. | Gain | on sale of investment | $9,550 |
| c. | Equity income | $70,215 |
Working:
| a. | ||
| Purchase price of 30 percent interest | 306,000 | |
| Net book value ($824,000 × 30%) | -247200 | |
| Copyright | 58,800 | |
| Divided by Remaining life of copyright | 16 | years |
| Annual Amortization | 3,675 | |
| 2017 basic equity income accrual ($200,000 × 30%) | 60,000 | |
| 2017 excess fair over book value amortization (above) | -3,675 | |
| Equity income—2017 | 56,325 | |
| 2018 basic equity income accrual ($256,000 × 30%) | 76,800 | |
| 2018 excess fair over book value amortization (above) | -3,675 | |
| Equity income 2018 | 73,125 | |
| b. | ||
| Purchase price—January 1, 2017 | 306,000 | |
| 2017 equity income (above) | 56,325 | |
| 2017 dividends ($90,000 × 30%) | -27000 | |
| 2018 equity income (above) | 73,125 | |
| 2018 dividends ($60,000 × 30%) | -18000 | |
| Investment in Sheffield—12/31/18 | 390,450 | |
| Sales price (given) | 400,000 | |
| Book value 1/1/19 (above) | -390,450 | |
| Gain on sale of investment | 9,550 | |
| c. | ||
| Ending inventory | 18,000 | |
| Gross profit percentage ($15,600 ÷ $40,000) | 39% | |
| Intra-entity gross profit | 7,020 | |
| Belden’s ownership | 30% | |
| Intra-entity gross profit recognized in 2018 | 2,106 | |
| Ending inventory | 38,000 | |
| Gross profit percentage ($26,840 ÷ $61,000) | 44% | |
| Intra-entity gross profit | 16,720 | |
| Belden’s ownership | 30% | |
| Intra-entity gross profit deferred | 5,016 | |
| 2018 equity income (part a above) | 73,125 | |
| Recognition of 2017 intra-entity profit (part c above) | 2,106 | |
| Deferral of 2018 intra-entity profit (part c above) | -5,016 | |
| Equity Income—2018 | 70,215 |
| year | cost | price | year end | Gross Profit |
| 2017 | 24400 | 40000 | 18000 | 15600 |
| 2018 | 34160 | 61000 | 38000 | 26840 |
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Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $308,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $820,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $324,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $792,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $320,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $784,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $320,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $828,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1,...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $302,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $780,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...
Belden acquires 30 percent of the outstanding voting shares of Sheffield on January 1, 2017, for...
Belden acquires 30 percent of the outstanding voting shares of Sheffield on January 1, 2017, for $522,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $1,560,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's entire excess cost over its share of Sheffield's book value in its 30 percent purchase. The copyright had a remaining...
Boardman, Inc. acquires 40% of the outstanding voting shares of Simon, Inc. on January 1, 2017,...
Boardman, Inc. acquires 40% of the outstanding voting shares of Simon, Inc. on January 1, 2017, for $380,000, which gives Boardman the ability to significantly influence Simon. Simon has a net book value of $900,000 on January 1, 2017. Simon’s asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Boardman’s excess cost over book value in its 40% purchase. The copyright had a remaining life of 10 years on...
Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2013, for...
Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2013, for $102,520 and categorizes the investment as an available-for-sale security. An additional 20 percent of the stock is purchased on January 1, 2014, for $235,900, which gives Anderson the ability to significantly influence Barringer. Barringer has a book value of $890,000 at January 1, 2013, and records net income of $196,000 for that year. Barringer declared and paid dividends of $79,000 during 2013. The book...
Anderson acquires 11 percent of the outstanding voting shares of Barringer on January 1, 2019, for...
Anderson acquires 11 percent of the outstanding voting shares of Barringer on January 1, 2019, for $109,000 and categorizes the investment as an available-for-sale security. An additional 20 percent of the stock is purchased on January 1, 2020, for $220,000, which gives Anderson the ability to significantly influence Barringer. Barringer has a book value of $900,000 at January 1, 2019, and records net income of $140,000 for that year. Barringer paid dividends of $60,000 during 2019. The book values of...
Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2013, for...
Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2013, for $102,520 and categorizes the investment as an available-for-sale security. An additional 20 percent of the stock is purchased on January 1, 2014, for $235,900, which gives Anderson the ability to significantly influence Barringer. Barringer has a book value of $890,000 at January 1, 2013, and records net income of $196,000 for that year. Barringer declared and paid dividends of $79,000 during 2013. The book...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $308,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $820,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...
Belden, Inc. acquires 30 percent of the outstanding voting shares of Sheffield, Inc. on January 1, 2017, for $302,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $780,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16...
Belden acquires 30 percent of the outstanding voting shares of Sheffield on January 1, 2017, for $522,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $1,560,000 at January 1, 2017. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Belden's entire excess cost over its share of Sheffield's book value in its 30 percent purchase. The copyright had a remaining...
Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2013, for $102,520 and categorizes the investment as an available-for-sale security. An additional 20 percent of the stock is purchased on January 1, 2014, for $235,900, which gives Anderson the ability to significantly influence Barringer. Barringer has a book value of $890,000 at January 1, 2013, and records net income of $196,000 for that year. Barringer declared and paid dividends of $79,000 during 2013. The book...
Anderson acquires 11 percent of the outstanding voting shares of Barringer on January 1, 2019, for $109,000 and categorizes the investment as an available-for-sale security. An additional 20 percent of the stock is purchased on January 1, 2020, for $220,000, which gives Anderson the ability to significantly influence Barringer. Barringer has a book value of $900,000 at January 1, 2019, and records net income of $140,000 for that year. Barringer paid dividends of $60,000 during 2019. The book values of...
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