Milani, Inc., acquired 10 percent of Seida Corporationon January 1, 2020, for $195,000 and appropriatelyaccounted for the investment using the fair - valuemethod. On January 1, 2021, Milani purchased anadditional 30 percent of Seida for $624,000 whichresulted in significant influence over Seida. On thatdate, the fair value of Seida's common stock was $2,080,000 in total. Seida's January 1, 2021, book valueequaled $1,930,000, although land was undervaluedby $130,000. Any additional excess fair value overSeida's book value was attributable to a trademark withan eight-year remaining life. During 2021, Seidareported income of $342,000 and declared and paiddividends of $100,000.Prepare the 2021 journal entries for Milani related to itsinvestment in Seida. (If no entry is required for atransaction/event, select "No journal entry required" inthe first account field.)Record acquisition of Seida stock.Record the 40% income earned during period by Seida.Record 2021 amortization for trademark excess fairvalue.Record dividend declaration from Seida.Record collection of dividend from investee.

To properly account for Milani, Inc.'s investment in Seida Corporation, we need to follow these…

Answered: Milani, Inc., acquired 10 percent of…

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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Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $422,000. Amortization of excess fair value associated with the 30% ownership is $15,000 per year. In 2021, Lindman earns an income of $138,000 and declares cash dividends of $46,000. Previously, in 2020, Lindman had sold inventory costing $35,000 to Matthew for $50,000. Matthew consumed all but 25 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $42,900 to Matthew for $65,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022. a. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman? b. What is the equity method balance in the Investment in Lindman account at the end of 2021? a. b. Equity…
Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2020, for $187,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2021, Milani purchased an additional 30 percent of Seida for $618,000 which resulted in significant influence over Seida. On that date, the fair value of Seida's common stock was $2,060,000 in total. Seida’s January 1, 2021, book value equaled $1,910,000, although land was undervalued by $132,000. Any additional excess fair value over Seida's book value was attributable to a trademark with an eight-year remaining life. During 2021, Seida reported income of $258,000 and declared and paid dividends of $101,000. Prepare the 2021 journal entries for Milani related to its investment in Seida. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $365,000. Amortization of excess fair value associated with the 30% ownership is $12,600 per year. In 2021, Lindman earns an income of $132,000 and declares cash dividends of $33,000. Previously, in 2020, Lindman had sold inventory costing $33,600 to Matthew for $56,000. Matthew consumed all but 20 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $44,800 to Matthew for $80,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022. a. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman? b. What is the equity method balance in the Investment in Lindman account at the end of 2021? a. b. Equity…
Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $193,000 and appropriately accounted for the investment using the fair-value method ... On January 1, 2018, Milani purchased an additional 30 percent of Seida for $675,000 which resulted in significant influence over Seida. ... On that date, the fair value of Seida’s common stock was $2,010,000 in total. Seida’s January 1, 2018, book value equaled $1,860,000, although land was undervalued by $138,000. Any additional excess fair value over Seida’s book value was attributable to a trademark with an 8-year remaining life. During 2018,Seida reported income of $262,000 and declared and paid dividends of $118,000. Prepare the 2018 journal entries for Milani related to its investments in Seida. Record acquisition of Seida stock. Record income for the year: 40% of the $262,000 reported income. Record 2018 amortization for trademark excess fair value. Record dividend declaration from Seida. Record collection…
On January 1, 2021, Cameron Inc. bought 20% of the outstanding common stock of Lake Construction Company for $360 million cash, giving Cameron the ability to exercise significant influence over Lake's operations. At the date of acquisition of the stock, Lake's net assets had a fair value of $800 million. Its book value was $700 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference. Lake's net income for the year ended December 31, 2021, was $180 million. During 2021, Lake declared and paid cash dividends of $25 million. The buildings have a remaining life of 10 years. Required: 2. Determine the amounts to be reported by Cameron.
Placid Lake Corporation acquired 70 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2020, when Scenic had a net book value of $470,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per year. Placid Lake's 2021 net income before consideration of its relationship with Scenic (and before adjustments for intra-entity sales) was $370,000. Scenic reported net income of $180,000. Placid Lake declared $170,000 in dividends during this period; Scenic paid $47,000. At the end of 2021, selected figures from the two companies' balance sheets were as follows: Placid Lake Scenic Inventory $ 210,000 $ 97,000 Land 670,000 270,000 Equipment (net) 470,000 370,000 During 2020, intra-entity sales of $110,000 (original cost of $56,000) were made. Only 10 percent of this inventory was still held within the consolidated entity at the end of 2020. In 2021, $160,000 in intra-entity sales were made…
Surrell Inc. owns 30% of the outstanding voting common stock of Vicker Co. and has the ability to significantly influence the investee's operations and decision making. On January 1, 2019, the balance in the Investment in Vicker Co. account was $402,000. Amortization associated with this acquisition is $10,800 per year. During 2019, Vicker earned an income of $108,000 and paid cash dividends of $36,000. Previously in 2018, Vicker had sold inventory costing $28,800 to Surrell for $48,000. All but 25% of this merchandise was consumed by Surrell during 2018. The remainder was used during the first few weeks of 2019. Additional sales were made to Surrell in 2019; inventory costing $33,600 was transferred at a price of $60,000. Of this total, 40% was not consumed until 2020. What amount of equity income would Surrell have recognized in 2019 from its ownership interest in Vicker? $9,936. $24,840. $19,872. $21,114. $18,948.
On January 1, 2021, Pepita Corporation purchased 25% of the outstanding voting shares of Pablito Supplies common stock for $210,000 cash. On that date, Pablito's book value and fair value were both $840,000. The equity method is deemed appropriate for this investment. Pablito's net income reported on December 31, 2021, was $100,000. During 2021, Pablito also paid cash dividends in the amount of $30,000. Required: Prepare the journal entries necessary to record the above information on Pepita Corporation's books during 2021.
Ashvinn
Belden, Inc., acquires 30 percent of the outstanding voting shares of Sheffield, Inc., on January 1, 2020, for $316,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $796,000 at January 1, 2020. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values, except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16 years at January 1, 2020. No goodwill resulted from Belden's share purchase. Sheffield reported net income of $192,000 in 2020 and $232,000 of net income during 2021. Dividends of $64,000 and $96,000 are declared and paid in 2020 and 2021, respectively. Belden uses the equity method. a. On its 2021 comparative income statements, how much income would Belden report for 2020 and 2021 in connection with the company's investment in Sheffield? b. If Belden sells its entire investment in…
Pronghorn Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,243,200 for 51,800 shares. Kulikowski Inc. declared and paid an $0.75 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $786,000 for 2021. The fair value of Kulikowski's stock was $27 per share at December 31, 2021.
BuyCo, Incorporated, holds 21 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 $11,100 per year. For 2023, Marqueen reported earnings of $111,000 and declares cash dividends of $29,000. During that year, Marqueen acquired inventory for $43,000, which it then sold to BuyCo for $86,000. At the end of 2023, BuyCo continued to hold merchandise with a transfer price of $29,000. What Equity in Investee Income should BuyCo report for 2023? How will the intra-entity transfer affect BuyCo’s reporting in 2024? If BuyCo had sold the inventory to Marqueen, would your answers to parts (a) and (b) change?

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