Compute the amount of investment income (loss) reported by Peace from its investment in Symbol for 20X2 and the balance in the investment account on December 31, 20X2, assuming the equity method is used in accounting for the investment.
Peace Company issued common shares with a par value of $50,000 and a market value of $165,000 in exchange for 30 percent ownership of Symbol Corporation on January 1, 20X2. Symbol reported the following balances on that date:
| SYMBOL CORPORATION | ||
| January 1, 20X2 | ||
| Book Value | Fair Value | |
|---|---|---|
| Assets | ||
| Cash | $ 40,000 | $ 40,000 |
| 80,000 | 80,000 | |
| Inventory (FIFO basis) | 120,000 | 150,000 |
| Land | 50,000 | 65,000 |
| Buildings & Equipment | 500,000 | 320,000 |
| Less: |
(240,000) | |
| Patent | 25,000 | |
| Total Assets | $ 550,000 | $ 680,000 |
| Liabilities & Equities | ||
| Accounts Payable | $ 30,000 | $ 30,000 |
| Bonds Payable | 100,000 | 100,000 |
| Common Stock | 150,000 | |
| Additional Paid-In Capital | 20,000 | |
| 250,000 | ||
| Total Liabilities & Equities | $ 550,000 |
The estimated economic life of the patents held by Symbol is 10 years. The buildings and equipment are expected to last 12 more years on average. Symbol paid dividends of $9,000 during 20X2 and reported net income of $80,000 for the year.
Required:
Compute the amount of investment income (loss) reported by Peace from its investment in Symbol for 20X2 and the balance in the investment account on December 31, 20X2, assuming the equity method is used in accounting for the investment.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
