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 20% Jones's common stock for $52,000 and gains the ability to exert significant influence over its investment and will begin to use the equity method for its investment.
What is the amount of the unrealized holding gain or loss that would be required on January 1, 2020? to appropriately transition to the equity method?
b. $ 2,000
Answer: b
24) Spring Valley Corp. purchased a 40% interest in A1 Automotive Company on July 1, 2020. On September 23, 2020, A1 Automotive paid dividends of $50,000 to its common stockholders. The investee reported 2020 net income of $150,000, which was earned evenly throughout the year.
What amount of Equity Income should Spring Valley report in its 2020 income statement?
b. $30,000
Answer: b
25) Investor owns 30% of Investee and applies the equity method. In 2020, Investor sells merchandise costing $240,000 to Investee for $300,000. Investee's ending inventory includes $50,000 purchased from Investor.
What amount of unrealized gross profit must be deferred in the equity method entry?
a. $ 3,000
Answer: a
26) Assume the facts in Question 29. Which of the following is the correct equity method entry to defer the unrealized gross profit?
a. Equity Income 3,000
Equity Investment 3,000
answer: a
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23.
On January 1, 2019,...
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...
On January 1, 20X7, Poke Corporation acquired 25 percent of the outstanding shares of Shove Corporation...
On January 1, 20X7, Poke Corporation acquired 25 percent of the outstanding shares of Shove Corporation for $100,000 cash. Shove Company reported net income of $75,000 and paid dividends of $30,000 for both 20X7 and 20X8. The fair value of shares held by Poke was $110,000 and $105,000 on December 31, 20X7 and 20X8 respectively. If Poke could not exercise significant influence over the investee, by what amount will Poke's 20X7 income increase due to its investment in Shove? a)...
Equity Method for Stock Investment At a total cost of $1,800,000, Herrera Corporation acquired 120,000 shares...
Equity Method for Stock Investment At a total cost of $1,800,000, Herrera Corporation acquired 120,000 shares of Tran Corp. common stock as a long-term investment. Herrera Corporation uses the equity method of accounting for this investment. Tran Corp. has 300,000 shares of common stock outstanding, including the shares acquired by Herrera Corporation. a. Journalize the entries by Herrera Corporation to record the following information: 1. Tran Corp. reports net income of $3,240,000 for the current period. Investment in Tran Corp....
Use the following facts for Multiple Choice problems 38 and 39: Assume on January 1, 2019,...
Use the following facts for Multiple Choice problems 38 and 39: Assume on January 1, 2019, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2019, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventories Land.. Property & equipment, net Total assets. $ 100,000 200,000 225,000 $ 525,000 $ 50.000 +10 80,000 - 5...
Question 18-20 are based off this sane chart 2019 2018 2017 (At December 31) Current assets...
Question 18-20 are based off this sane chart
2019 2018 2017 (At December 31) Current assets Tangible fixed assets Intangible assets. Total assets.. $285,000 662,500 40.000 $987,500 $277.500 575,000 45,000 $897.500 $207.000 563.000 50,000 $320,000 Current liabilities Noncurrent liabilities Common stock Additional pald-in capital Retained earnings Stockholders' equity Total liabilities and equity $120,000 266,250 100,000 100,000 400,000 600,000 $110,000 242,500 100,000 100.000 345,000 545,000 $897500 $100,000 220,000 100,000 100,000 300,000 500,000 $820,000 $986250 2012 2018 (For the years ended December...
if 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of...
if 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock. On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's common stock, which represents 25% of Belinda's outstanding common stock. Belinda reported net...
(At December 31) 2019 2018 2017 Current assets Tangible fixed assets Intangible assets. Total assets.... $285,000...
(At December 31) 2019 2018 2017 Current assets Tangible fixed assets Intangible assets. Total assets.... $285,000 662,500 40,000 $987,500 $277,500 575,000 45,000 $897,500 $207,000 563,000 50,000 $820,000 Current liabilities.. Noncurrent liabilities. Common stock. Additional paid-in capital. Retained earnings Stockholders' equity Total liabilities and equity $120,000 266,250 100,000 100,000 400,000 600,000 $986,250 $110,000 242,500 100,000 100,000 345,000 545,000 $897,500 $100,000 220,000 100,000 100,000 300,000 500,000 $820,000 2019 2018 2017 (For the years ended December 31) Revenues Expenses .. Net income $970,000...
Stock Inv Stock Investments Loss on Sale of Stock Investments Cash.. . d. 25% of the...
Stock Inv Stock Investments Loss on Sale of Stock Investments Cash.. . d. 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock, 6) On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's...
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...
Use the following facts for Multiple Choice problems 38 and 39: Assume on January 1, 2019, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2019, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventories Land.. Property & equipment, net Total assets. $ 100,000 200,000 225,000 $ 525,000 $ 50.000 +10 80,000 - 5...
Question 18-20 are based off this sane chart
2019 2018 2017 (At December 31) Current assets Tangible fixed assets Intangible assets. Total assets.. $285,000 662,500 40.000 $987,500 $277.500 575,000 45,000 $897.500 $207.000 563.000 50,000 $320,000 Current liabilities Noncurrent liabilities Common stock Additional pald-in capital Retained earnings Stockholders' equity Total liabilities and equity $120,000 266,250 100,000 100,000 400,000 600,000 $110,000 242,500 100,000 100.000 345,000 545,000 $897500 $100,000 220,000 100,000 100,000 300,000 500,000 $820,000 $986250 2012 2018 (For the years ended December...
if 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock. On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's common stock, which represents 25% of Belinda's outstanding common stock. Belinda reported net...
(At December 31) 2019 2018 2017 Current assets Tangible fixed assets Intangible assets. Total assets.... $285,000 662,500 40,000 $987,500 $277,500 575,000 45,000 $897,500 $207,000 563,000 50,000 $820,000 Current liabilities.. Noncurrent liabilities. Common stock. Additional paid-in capital. Retained earnings Stockholders' equity Total liabilities and equity $120,000 266,250 100,000 100,000 400,000 600,000 $986,250 $110,000 242,500 100,000 100,000 345,000 545,000 $897,500 $100,000 220,000 100,000 100,000 300,000 500,000 $820,000 2019 2018 2017 (For the years ended December 31) Revenues Expenses .. Net income $970,000...
Stock Inv Stock Investments Loss on Sale of Stock Investments Cash.. . d. 25% of the common stock of an investee company is purchased as a long-term investment, the appropriate method of accounting for the investment is a. the cost method. b. the equity method. C. the preparation of consolidated financial statements. d. determined by agreement with whomever owns the remaining 90% of the stock, 6) On January 1, 2020, Jamestina Corp. paid $1,800,000 for 100,000 shares of Belinda Company's...
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...
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