None Equity method of accounting with intercompany inventory transactions An investor company owns 25%of the common stock of an investee company. The investor has significant influence over the investee,and acquired its equity interest in the investee on january 1 2021 for $1,323,000. On the date ofacquisition, the investee's stockholders' equity was $5,292,000 and the fair values of the investee'sindividual net assets were equal to their reported book values During the year ended December 31, 2021,the investee reported net income of $126,000 and dividends of $25,200. During the year endedDecember 31, 2022, the investee reported net income of $151,200 and dividends of $ 37,800 The investorroutinely sells inventory to the investee at a 30% profit margin. At December 31, 2021 and 2022, theinvestee held inventories purchased from the investor for $75,600 and $100,800 respectively. (All of theseinventories on hand at the end of the year are sold by the investee to unaffiliated companies in the nextperiod.) What amount of investment income from the investee did the investor recognize during theyear ended December 31, 2022 Select one: a$39,690 b$35,910 $ 37,800 $43,470

Step 1: Initial Equity InvestmentThe investor's equity investment is 25% of the investee's…

Answered: Equity method of accounting with…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 19E

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Net Income and Comprehensive Income At the beginning of 2019, JR Companys shareholders equity was as follows: During 2019, the following events and transactions occurred: 1. JR recognized sales revenues of 108,000. It incurred cost of goods sold of 62,000 and operating expenses of 12,000, 2. JR issued 1,000 shares of its 5 par common stock for 14 per share. 3. JR invested 30,000 in available-for-sale securities. At the end of the year, the securities had a fair value of 35,000. 4. JR paid dividends of 6,000. The income tax rate on all items of income is 30%. Required: 1. Prepare a 2019 income statement for JR which includes net income and comprehensive income ignore earnings per share). 2. For 2016 prepare a separate (a) income statement (ignore earnings per share) and (b) statement of comprehensive income.
Equity method journal entries with intercompany sales of inventoryAssume that an investor owns 30% of an investee, and accounts for its investment using the equity method. At the beginning of the year, the Equity Investment was reported on the investor’s balance sheet at $300,000. During the year, the investee reported net income of $100,000 and paid dividends of $20,000 to the investor. In addition, the investor sold inventory to the investee, realizing a gross profit of $40,000 on the sale. At the end of the year, 20% of the inventory remained unsold by the investee. Requireda. How much equity income should the investor report for the year? $Answer b. What is the balance of the Equity Investment at the end of the year? $Answer c. Assume that the remaining inventory is sold in the following year and that the investee reports $150,000 of net income. How much equity income will the investor report for the following year? $Answer
Property dividends KAKAYANIN Company owns 15% of the outstanding ordinary shares of KHO Corp. On November 1, 2021, KHO declared its inventory as property dividends. Data relating to the fair values of the inventory follow: Date Total Fair Values of Property Dividends November 1, 2021 250,000 December 31, 2021 450,000 February 15, 2022 410,000 How much is the dividend income to be recognized in 2021? Prepare all the necessary entries at the date of declaration, date of record and date of payment.
REQUIRED: How much purchases should be reported on the statement of comprehensive income for the year?
Accounting Assume an investor company purchases all of the stock of the investee company in a stock purchase for $900 on 1/1/2022. The investee's balance sheet on the date of purchase is as follows: Accounts receivable $75 Mortgage payable $75 Inventories $150 Building $600 Stockholders' equity $750 Total assets $825 Total liabilities and equity $825 Assume the additional purchase price relates to the b uilding value not reported on investee company's balance sheet. The building held by the investee has a remaining useful life of 10 years on the acquisition date and depreciated based on the straight-line method. Also assume, subsequent to the purchase, the investee reports net income of $150 and pays $45 in dividends to the investor during 2022. Required: Provide all necessary journal entries related to this investment for the investor company using the equity method during 2022
Reporting a Change to the Equity Method Assume an investor company acquires for $9,600 a 5% investment in the common stock of an investee company on February 15, 2021. The investor determined the common stock of the investee has a readily determinable fair value. On December 31, 2021, the fair value of the 5% common stock investment is $11,760, and the investor company made all of the appropriate adjustments in preparation of the annual financial statements. On March 1, 2022, the investor company acquires an additional 20% of common stock of the investee for $48,640, thereby increasing the investor's overall ownership interest to 25%. Required a. Prepare the journal entries the investor company should record on March 1, 2022. b. For this question only, assume instead that the investor determined, on February 15, 2021, that the common stock of the investee does not have a readily determinable fair value. In addition, the investor company determined that the additional 20% common stock…
How much should be reported as current assets in the December 31, 2019 Statement of Financial Position?
The following investment portfolio of equity securities (all acquired during 2021) accounted for as fair value through other comprehensive income are held by GHI Company on December 31, 2021: Investment Acquisition Cost P3,300,000 HJK, Inc. shares (1,100 shares) Fair value, 12/31/21 P3,100/share 9/share 225/share LMN Co. shares (35,000 shares) OPQ Corp. shares (12,000 shares) 350,000 2,400,000 The following transactions occurred during 2022: • A 20% stock dividend was declared and issued on the HJK, Inc. shares, after which the company sold 330 shares at its fair value of P2,700/share. Additional 5,000 shares of LMN Co. were purchased by the company during the year at fair value of P9.50/share, excluding P0.50/share transaction costs. LMN Co. then declared and paid a P2/share cash dividend. ● A 2-for-3 split was declared by OPQ Corp. to reduce its number of shares. OPQ Corp. declared and paid a P3/share cash dividend after the split. The fair value of the equity securities at year-end…
What amount should be recognized in 2019 Other Comprehensive Income?
Wildhorse Company's December 31, 2024 stockholders' equity section reported Accumulated Other Comprehensive Income of $61000 which reflected cumulative gains. The following information is available for Wildhorse for 2025: Net income Realized gain on sale of available-for-sale debt securities Unrealized holding gain on available-for-sale debt securities Unrealized holding loss on available-for-sale equity securities What is Wildhorse's comprehensive income for 2025? O $266500 O $322500 O $307500 O $225500 $266500 36000 41000 21000
The following financial information relates to Cams Limited. Statement of Financial Position as at 31 December 2020 and 2021 2021 Ordinary share capital Retained earnings Property, plant and equipment Investments Debentures 12.5% Inventory Trade debtors Prepaid expenses Trade creditors Bank overdraft SARS (income tax) Shareholders for dividends R 400 000 000 Profit before interest and tax Depreciation on equipment Dividends received on investments Interest on dividends Income tax 55 230 000 165 000 20 000 124 000 37 000 25 21 000 000 5 000 30 000 Statement of comprehensive income for the year 31 December 2021 REGENT BUSINESS SCHOOL (RBS) ACADEMIC AND ASSESSMENT CALENDAR-JANUARY 2022 Note no. 1 for the year ended 31 December 2020 and 2021 Property, plant and equipment Land and building at cost Equipment at carrying value R 295 000 5000 195 000 2021 (R) 200 000 30.000 230 000 110 000 60 000 R 2020 120 000 28 500 1500 42 500 25 000 7 500 20 000 BACHELOR OF COMMERCE IN HUMAN RESOURCE…
Recording Entries for Equity Investment: FV-NI and Equity Method On January 1, 2020, Allen Corporation purchased 30% of the 66,000 outstanding common shares of Towne Corporation at $17 per share as a long-term investment. On the date of purchase, the book value and the fair value of the net assets of Towne Corporation were equal. During the year, Towne Corporation reported net income of $52,800 and declared and paid dividends of $17,600. As of December 31, 2020, common shares of Towne Corporation were trading at $20 per share. Journal Entries with Significant Influence Journal Entries without Significant Influence Financial Statement Presentation c. Indicate the amount of income that would be reported on the 2020 income statement and the investment balance on the 2020 year-end balance sheet under requirement (a) and requirement (b). Income Investment Net Balance 2020 Dec. 31, 2020 a. Investment accounted for under the equity method Answer Answer b. Investment…

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