On January 1, 2021, you purchased 25% of the outstanding common stock of Tiny Company for $6,700 in cash and plan to exercise significant influence over Tiny. On the acquisition date, Tiny’s merchandise had a book value $800 higher than its market value (FIFO system) and their patent had a book value $1,000 lower than its market value (with a five year remaining life). On December 1, 2021, you received $75 of cash dividends from Tiny. On December 31, 2021, Tiny Company reported $2,000 of net income for the ENTIRE year and your shares of Tiny Company had a market value of $7,000.
On January 1, 2021, you purchased 25% of the outstanding common stock of Tiny Company for $6,700 in cash and plan to exercise significant influence over Tiny. On the acquisition date, Tiny’s merchandise had a book value $800 higher than its market value (FIFO system) and their patent had a book value $1,000 lower than its market value (with a five year remaining life). On December 1, 2021, you received $75 of cash dividends from Tiny. On December 31, 2021, Tiny Company reported $2,000 of net income for the ENTIRE year and your shares of Tiny Company had a market value of $7,000.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:On January 1, 2021, you purchased 25% of the outstanding common stock of Tiny Company for $6,700 in cash and plan to exercise significant influence over Tiny. On the acquisition date, Tiny’s merchandise had a book value $800 higher than its market value (FIFO system) and their patent had a book value $1,000 lower than its market value (with a five year remaining life). On December 1, 2021, you received $75 of cash dividends from Tiny. On December 31, 2021, Tiny Company reported $2,000 of net income for the ENTIRE year and your shares of Tiny Company had a market value of $7,000.
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