Belden, Incorporated, acquires 30 percent of the outstanding voting shares of Sheffield, Incorporated,on January 1, 2023, for $320,000, which gives Belden the ability to significantly influence Sheffield.Sheffield has a net book value of $804,000 at January 1, 2023. Sheffield's asset and liability accountsshowed carrying amounts considered equal to fair values, except for a copyright whose valueaccounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had aremaining life of 16 years at January 1, 2023. No goodwill resulted from Belden's share purchase.Sheffield reported net income of $178,000 in 2023 and $250,000 of net income during 2024.Dividends of $76,000 and $96,000 are declared and paid in 2023 and 2024, respectively. Belden usesthe equity method.Required:a. On its 2024 comparative income statements, how much income would Belden report for 2023 and2024 in connection with the company's investment in Sheffield?b. If Belden sells its entire investment in Sheffield on January 1, 2025, for $414,000 cash, what is theimpact on Belden's income?c. Assume that Belden sells inventory to Sheffield during 2023 and 2024 as follows:Cost toBelden$ 26,46034,770Year-End Balance (at Transfer Price)$18,000 (sold in following year)38,000 (sold in following year)What amount of equity income should Belden recognize for the year 2024?b.Year20232024a. Equity income 2023a. Equity income 2024Price toSheffield$ 42,00061,000c. Equity income 2024on sale of investment

Particulars Amount($)Purchase price of 30 percent interest320,000Net book value…

a. On its 2024 comparative income statements, how much income would Belden report for 2023 and 2024 in connection with the company's investment in Sheffield? b. If Belden sells its entire investment in Sheffield on January 1, 2025, for $414,000 cash, what is the impact on Belden's income? c. Assume that Belden sells inventory to Sheffield during 2023 and 2024 as follows: Cost to Belden $ 26,460 34,770 Year-End Balance (at Transfer Price) $18,000 (sold in following year) 38,000 (sold in following year) What amount of equity income should Belden recognize for the year 2024? b. Year 2023 2024 a. Equity income 2023 a. Equity income 2024 Price to Sheffield $ 42,000 61,000 c. Equity income 2024 on sale of investment

a. On its 2024 comparative income statements, how much income would Belden report for 2023 and 2024 in connection with the company's investment in Sheffield? b. If Belden sells its entire investment in Sheffield on January 1, 2025, for $414,000 cash, what is the impact on Belden's income? c. Assume that Belden sells inventory to Sheffield during 2023 and 2024 as follows: Cost to Belden $ 26,460 34,770 Year-End Balance (at Transfer Price) $18,000 (sold in following year) 38,000 (sold in following year) What amount of equity income should Belden recognize for the year 2024? b. Year 2023 2024 a. Equity income 2023 a. Equity income 2024 Price to Sheffield $ 42,000 61,000 c. Equity income 2024 on sale of investment

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

Belden, Incorporated, acquires 30 percent of the outstanding voting shares of Sheffield, Incorporated,
on January 1, 2023, for $320,000, which gives Belden the ability to significantly influence Sheffield.
Sheffield has a net book value of $804,000 at January 1, 2023. 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 years at January 1, 2023. No goodwill resulted from Belden's share purchase.
Sheffield reported net income of $178,000 in 2023 and $250,000 of net income during 2024.
Dividends of $76,000 and $96,000 are declared and paid in 2023 and 2024, respectively. Belden uses
the equity method.
Required:
a. On its 2024 comparative income statements, how much income would Belden report for 2023 and
2024 in connection with the company's investment in Sheffield?
b. If Belden sells its entire investment in Sheffield on January 1, 2025, for $414,000 cash, what is the
impact on Belden's income?
c. Assume that Belden sells inventory to Sheffield during 2023 and 2024 as follows:
Cost to
Belden
$ 26,460
34,770
Year-End Balance (at Transfer Price)
$18,000 (sold in following year)
38,000 (sold in following year)
What amount of equity income should Belden recognize for the year 2024?
b.
Year
2023
2024
a. Equity income 2023
a. Equity income 2024
Price to
Sheffield
$ 42,000
61,000
c. Equity income 2024
on sale of investment

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Step 1: Compute Equity Income for 2023

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Step 4: Compute Equity Income under 2024

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