BuyCo holds 25 percent of the outstanding shares of Marqueen and appropriatelyapplies the equity method of accounting. Excess cost amortization (related to a patent)associated with this investment amounts to $10,000 per year. For 2012, Marqueenreported earnings of $100,000 and pays cash dividends of $30,000. During that year,Marqueen acquired inventory for $50,000, which it then sold to BuyCo for $80,000. Atthe end of 2012, BuyCo continued to hold merchandise with a transfer price of $32,000.a. What Equity in Investee Income should BuyCo report for 2012? (Do not roundintermediate calculations.)Equity in InvesteeIncomeb. How will the intra-entity transfer affect BuyCo's reporting in 2013? (Input the amountas a positive value.)Equity accrual for 2013 will increaseby $C.If BuyCo had sold the inventory to Marqueen, whether the answers to (a) and (b)would change?YesO No

Intra-entity transfers refer to the movement of assets or liabilities between different entities…

Answered: BuyCo holds 25 percent of the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Pearl Corporation paid $300,000 on January 1, 2010 for a 35% interest in Sandlin Inc. On January 1, 2010, the book value of Sandlin's stockholders' equity consisted of $400,000 of common stock and $400,000 of retained earnings. All the excess purchase cost over book value acquired was attributable to a patent with an estimated life of 5 years. During 2010 and 2011, Sandlin paid $6,000 of dividends each quarter and reported net income of $120,000 for 2010 and S160,000 for 2011. Pearl used the equity method. Required: 1. Calculate Pearl's income from Sandlin for 2010. 2. Determine the balance of Pearl's Investment in Sandlin account on December 31, 2010
Porter Corporation purchased 80% of the common stock of Salem Company for $850,000 on January 1, 2013. During the next three years, Salem had the following income and Dividends paid: Year Income Dividends 2013 $100,000 $25,000 2014 $110,000 $35,000 2015 $170,000 $60,000 Prepare the journal entries made under both methods and then compute the ending balance in the "investment" account under both methods.
As a long-term investment at the beginning of the fiscal year, Florists International purchased 40% of Nursery Supplies Inc.'s 6 million shares for $50 million. The fair value and book value of the shares were the same at that time. The company realizes that this investment typically would be accounted for under the equity method, but instead chooses the fair value option. During the year, Nursery Supplies earned net income of $30 million and distributed cash dividends of $1.25 per share. At the end of the year, the fair value of the shares is $46 million. Required: 1. How would this investment be classified on Florists balance sheet? Trading securities Held-to-maturity security Significant-influence investment Other securities 2. Prepare all appropriate journal entries related to the investment during 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions, (i.e., 10,000,000 should be entered…
Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2020, for $652,000 in cash. Annual excess amortization of $13,700 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $498,000, and Rambis reported a $232,000 balance. Herbert reported internal net income of $44,750 in 2020 and $58,350 in 2021 and declared $10,000 in dividends each year. Rambis reported net income of $23,300 in 2020 and $36,900 in 2021 and declared $5,000 in dividends each year. a. Assume that Herbert’s internal net income figures above do not include any income from the subsidiary. If the parent uses the equity method, what is the amount reported as consolidated retained earnings on December 31, 2021? What would be the amount of consolidated retained earnings on December 31, 2021, if the parent had applied either the initial value or partial equity method for internal accounting purposes? Equity method, initial value method and partial…
BuyCo, Inc. holds 25 percent of the outstanding shares of Marqueen Company and appropriately applies the equity method of accounting. Excess cost amortization (related to a patent) associated with this investment amounts to $10,000 per year. For 2017, Marqueen reported earnings of $100,000 and declares cash dividends of $30,000. During that year, Marqueen acquired inventory for $50,000, which it then sold to BuyCo for $80,000. At the end of 2017, BuyCo continued to hold merchandise with a transfer price of $32,000.a. What Equity in Investee Income should BuyCo report for 2017?b. How will the intra-entity transfer affect BuyCo’s reporting in 2018?c. If BuyCo had sold the inventory to Marqueen, how would the answers to (a) and (b) have changed?
Lemon Ltd has a December 31 year end. On January 1, 2018 Lemon acquires 4000 shares of Nike Inc at a cost of $150 per share. Transaction cost is $1200. The Investment is classified as available for Sale. On December 31, 2018 the Fair Value of Nike share has decreased to $120/share. On March 1, 2019 Lemon Ltd sells the shares for $135 per share. Transaction cost for the sale is $2000. Record the journal entries in the books of Lemon Ltd.
Parent acquires 80% of Sub for $170,000 on December 31, 2014. In 2015 Sub has net income of $140,000 and paid dividends of $70.000. Amortization of excess fair value over book value for the year was $43,750. What is the Investment in Sub account balance as of December 31, 2015.
On January 1, 2013, Ruark Corporation acquired a 40 percent interest in Batson, Inc., for $210,000. On that date, Batson's balance sheet disclosed net assets with both a fair and book value of $360,000. During 2013, Batson reported net income of $80,000 and paid cash dividends of $25,000. Ruark sold inventory costing $30,000 to Batson during 2013 for $40,000. Batson used all of this merchandise in its operations during 2013. Prepare all of Ruark's 2013 journal entries to apply the equity method to this investment. General Journal Debit To record acquisition. Investment in Batson, Inc. Cash To recognize income earned. Investment in Batson, Inc. Equity in Investee Income To record collection of dividend. Cash Investment in Batson, Inc. Credit
Fizzy Inc. acquired 25% of the stock of Bubbly Inc. at the beginning of 2022 for $5,000,000, and reports the investment using the equity method. There is no basis difference, and no intercompany transactions. Bubb ly's retained earnings increased by $800,000 in the two years since acquisition, and its AOCI increased by $20,000. Bubbly declared and paid dividends of $300,000 during this time. What amount does Fizzy report for its investment in Bubbly at the end of 2022? O a. 5,205,000 Ob.5,130,000 O c. 5,125,000 O d. 5,200,00
On January 1, 2022, Green Corporation purchased 25% of the outstanding voting common stock of Gold Company for $500,000. The book value of Gold Company as a whole was $1,700,000. The excess of cost over book value is attributable to a license (intangible asset) to be amortized over fifteen years. For the year ended December 31, 2022, Gold reported net income of $300,000 and paid cash dividends of $12,000. What is the carrying value of Green's investment in Gold at December 31, 2022? O $417,000. O $567,000. O $572,000. O $550,000.
On July 1, 2013, Tremen Corporation acquired 40% of the shares of Delany Company. Tremen paid $3,000,000 for the investment, and that amount is exactly equal to 40% of the fair value of identifiable net assets on Delany's balance sheet. Delany recognized net income of $1,000,000 for 2013, and paid $150,000 quarterly dividends to its shareholders. After all closing entries are made, Tremen's "Investment in Delany Company" account would have a balance of: A. $3,200,000. B. $3,160,000. C. $3,000,000.| D. $3,080,000. Mars Inc. has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PB0 report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $7,200. The discount rate applied by the actuary was 8%. What was the beginning PBO? A. $90,000. B. $100,000. C. $107,200. D. $112,000. A company reports pretax accounting income of $10 million, but because of…
In January 2020, Marcus, Inc., acquired 20 percent of the outstanding common stock of Lily, Inc., for $769,000. This investment gave Marcus the ability to exercise significant influence over Lily, whose balance sheet on that date showed total assets of $4,199,000 with liabilities of $909,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years. In 2020, Lily reported net income of $222,000. In 2021, Lily reported net income of $268,250. Dividends of $79,000 were declared in each of these two years. What is the equity method balance of Marcus's Investment in Lily, Inc., at December 31, 2021? Multiple Choice $919,150. $813,250. $835,450. $908,050.

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