Please use MS Excel to compute answer. Thanks.
Arami Company purchased common stock in Ramona Company for
$400,000. In the current year, Ramona Company reported net income
of $50,000 and paid a dividend of $32,000. At the end of the year,
the market value of the investment in Ramona Company was
$410,000.
A) Assume Arami Company owns 10% of the shares of Ramona Company.
Arami Company considers the investment to be available-for-sale
securities. Show the effects of the transactions above on the
accounts of Arami Company using the balance sheet equation.
B) Assume Arami Company owns 25% of the shares of Ramona Company.
Show the effects of the transactions above on the accounts of Arami
Company using the balance sheet equation.
Answer :
(a).
Dividend income (Current asset) $3200
(10% of $32,000)
Investment - Available for sale securities ( at market price) : $410,000
(Current assets)
(b).
Reserve and surplus (25% of $32000) : $8,000
Long term investment (at cost price) : $400,000
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Please use MS Excel to compute answer. Thanks. Arami Company purchased common stock in Ramona Company...