Homework Answers
|
As total income accrual (no unearned gains) |
$140990 |
|
As GAIN on sale of shares |
$74258 |
Explanations :-
|
Equity method income accrual for 2018: |
|
|
25% of $613000 for ½ year |
76625 |
|
21% of $613000 for ½ year |
64365 |
|
Total Income accrual (no ammortisation or deferred gross profit) |
140990 |
|
Gain on sale (below) |
74258 |
|
Total Income statement effect - 2018 |
215248 |
Gain on sale of 13000 shares :-
|
Initial acquisition-2016 |
1527000 |
|
Income accrual-2016 (417000 * 25%) |
104250 |
|
25% of Dividend – 2016 (25% * 104000) |
(26000) |
|
Income accrual-2017 (571000 * 25%) |
142750 |
|
25% of Dividend – 2017 (25% * 141000) |
(35250) |
|
Income accrual-2018 (613000* 25%) for ½ year |
76625 |
|
25% of Dividend – 2018 (25% * 156000) for ½ year |
(19500) |
|
Book value of 76000 shares on july 1 2018 |
1769875 |
Cash proceeds from sale = 13000 * $29 = $377000
Less: Book value of shares sold = ($1769875 * (13000/76000) = $302742
Gain on sale = 377000 – 302742 = $74258
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