Equity Method Investment On January 1, 2022, Ace Beverages purchases 40 percent of the stock of an organic sports drink company, Sporty Inc., at a cost of $2,600,000 when Sporty's book value was $5,200,000. Ace has a signific influence over Sporty's operating and financial decisions. The excess of investment cost over book value is attributed entirely to goodwill, and there are no intercompany transactions between the two companies. Sporty reports the following income and dividends for 2022 through 2025: Income (Loss) Dividends $260,000 $13,000 (104,000) 65,000 208,000 2022 2023 2024 2025 5,200 52,000 Required a. Calculate the basis difference that is attributed to goodwill. $ 520,000 b. Calculate the investment balance, reported on Ace's December 31, 2025, balance sheet. $ 2,847,120

Equity Method Investment On January 1, 2022, Ace Beverages purchases 40 percent of the stock of an organic sports drink company, Sporty Inc., at a cost of $2,600,000 when Sporty's book value was $5,200,000. Ace has a signific influence over Sporty's operating and financial decisions. The excess of investment cost over book value is attributed entirely to goodwill, and there are no intercompany transactions between the two companies. Sporty reports the following income and dividends for 2022 through 2025: Income (Loss) Dividends $260,000 $13,000 (104,000) 65,000 208,000 2022 2023 2024 2025 5,200 52,000 Required a. Calculate the basis difference that is attributed to goodwill. $ 520,000 b. Calculate the investment balance, reported on Ace's December 31, 2025, balance sheet. $ 2,847,120

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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Subject: accounting