ABC Company owns 100% of XYZ Company's outstanding shares, which were 30,000 shares. On December 31, 2017, the investment account reflected a balance of $600,000. The investment account is maintained in the internal records of ABC using the equity method. Amortization on this acquisition amounted to $1,000 per year that related to a patent that was amortized over 10 years since January 15, 2015. On July 1, 2018, ABC Company sold 70% of the outstanding shares to another company for $500,000 cash. On that date, the shares were trading at $10 a share. After this event, ABC Company cannot control the operations of XYZ Company and thus has to use the equity method to account for its investments. In 2018, XYZ Company earned $150,000 and paid dividends of $40,000. Assume net income and dividends occur evenly during the year. Required: Prepare the required entry(ies) on July 1st, 2018.

ABC Company owns 100% of XYZ Company's outstanding shares, which were 30,000 shares. On December 31, 2017, the investment account reflected a balance of $600,000. The investment account is maintained in the internal records of ABC using the equity method. Amortization on this acquisition amounted to $1,000 per year that related to a patent that was amortized over 10 years since January 15, 2015. On July 1, 2018, ABC Company sold 70% of the outstanding shares to another company for $500,000 cash. On that date, the shares were trading at $10 a share. After this event, ABC Company cannot control the operations of XYZ Company and thus has to use the equity method to account for its investments. In 2018, XYZ Company earned $150,000 and paid dividends of $40,000. Assume net income and dividends occur evenly during the year. Required: Prepare the required entry(ies) on July 1st, 2018.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

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Styles
Ed
ABC Company owns 100% of XYZ Company's outstanding shares, which were 30,000 shares. On
December 31, 2017, the investment account reflected a balance of $600,000. The investment
account is maintained in the internal records of ABC using the equity method. Amortization on
this acquisition amounted to $1,000 per year that related to a patent that was amortized over 10
years since January 1$, 2015.
On July 1, 2018, ABC Company sold 70% of the outstanding shares to another company for
$500,000 cash. On that date, the shares were trading at $10 a share. After this event, ABC
Company cannot control the operations of XYZ Company and thus has to use the equity method
to account for its investments.
In 2018, XYZ Company earned $150,000 and paid dividends of $40,000. Assume net income and
dividends occur evenly during the year.
Required:
Prepare the required entry(ies) on July 1st, 2018.

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