Question

Laureen aliasalienate B. An unrealized gain or loss is reported as the difference between welling price original cost C. A realized gain or loss is reported as the difference between selling price and cry value D. An unrealized gain or loss is reported as the difference between selling price and carrying value E. Any gain or loss is reported as part as comprehensive income On January 4, 2007, Harley, Ino, acquired 40% of the outstanding common stock of Bike Co. for $2,400,000. This investment gave Harley the ability to exercise significant influence over Bike. Bike's assets on that date were recorded at $10,500,000 with liabilities of $4,500,000. There were no other differences between book and fair values. During 2007, Bike reported net income of $500,000. For 2008, Bike reported net income of $800,000. Dividends of $300,000 were paid in each of these two years. 11. How much income did Harley report from Bike for 2007? A. $120,000 B. $200,000 C. $300,000 D. $320,000 E. $500,000 12. How much income did Harley report from Bike for 2008? A. $120,000 B. $200,000 C. $300,000 D. $320,000 e. $500,000 13. What was the reported balance of Harley's Investment in Bike Co. at December 31, 2007? A. $880,000 B. $2,400,000 C. $2,480,000 D. $2,600,000 E. $2,900,000 14. What was the reported balance of Harley's Investment in Bike Co. at December 31, 2008? A. $2,400,000 B. $2,480,000 C. $2,500,000 D. $2,600,000 E. $2,680,000

Answer 1

11)The Harley report the income from Bike for 2007 is calculated below:

Harley, Inc. acquired 40% of the outstanding common stock of Bike Co and Bike's reported net income of 2007 is $500,000

So,the Harley's report the income from Bike for 2007 = $500,000*40%

=$200,000

Harley's report the income from Bike for 2007 is $200,000

So correct answer is option (B)

12)The Harley report the income from Bike for 2008 is calculated below:

Harley, Inc. acquired 40% of the outstanding common stock of Bike Co and Bike's reported net income of 2008 is $800,000

So,the Harley's report the income from Bike for 2008 = $800,000*40%

=$320,000

Harley's report the income from Bike for 2008 is $320,000

So correct answer is option (D)

13)Harley's reported Investment balance in Bike Co. at December 31, 2007 is calculated below:

Harley, Inc. acquired 40% of the outstanding common stock of Bike Co.,Bike's reported net income of 2007 is $500,000 and Dividends paid $300,000 in 2007.

Harley's reported Investment balance in Bike Co. at December 31, 2007

= $2,400,000 + 40%*($500,000 - $300,000)

=$2,400,000 + 40%*$200,000

=$2,400,000 + $80,000

=$2,480,000

Harley's reported Investment balance in Bike Co. at December 31, 2007 is $2,480,000

So correct answer is option (C)

14)Harley's reported Investment balance in Bike Co. at December 31, 2008 is calculated below:

Harley, Inc. acquired 40% of the outstanding common stock of Bike Co.,Bike's reported net income of 2008 is $800,000 and Dividends paid $300,000 in 2008.

Harley's reported Investment balance in Bike Co. at December 31, 2008

= $2,480,000($2,400,000 + $80,000) + 40%*($800,000 - $300,000)

=$2,480,000 + 40%*$500,000

=$2,480,000 + $200,000

=$2,680,000

Harley's reported Investment balance in Bike Co. at December 31, 2008 is $2,680,000

So correct answer is option (E)