On 1/1/2008 Aero Company purchased 10% of Bert Company's common stock for $80,000, which was equal to 10% of the book value of Bert on 1/1/2008. Aero appropriately used the cost method of accounting for its investment. Aero purchased an additional 25% of Bert's common stock on 1/1/2010 for $190,000 which was also equal to its share of book value at that date. Aero can now exercise significant influence over the operating and financial policies of Bert. The total net income and dividends of Bert are as follows: Year 2008 2009 Net Income 2010 $50,000 $75,000 $100,000 $20,000 $30,000 $50,000 Based on the information given above, the amount of income that Aero would report on its income statement related to its investment in Bert for 2008 is: Dividends 1.$0 2. $3,000 3. $7,500 4.$6,500 O 5. None of the above

On 1/1/2008 Aero Company purchased 10% of Bert Company's common stock for $80,000, which was equal to 10% of the book value of Bert on 1/1/2008. Aero appropriately used the cost method of accounting for its investment. Aero purchased an additional 25% of Bert's common stock on 1/1/2010 for $190,000 which was also equal to its share of book value at that date. Aero can now exercise significant influence over the operating and financial policies of Bert. The total net income and dividends of Bert are as follows: Year 2008 2009 Net Income 2010 $50,000 $75,000 $100,000 $20,000 $30,000 $50,000 Based on the information given above, the amount of income that Aero would report on its income statement related to its investment in Bert for 2008 is: Dividends 1.$0 2. $3,000 3. $7,500 4.$6,500 O 5. None of the above

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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Question

On 1/1/2008 Aero Company purchased 10% of Bert Company's common stock for $80,000, which was equal to 10% of the book value of Bert on 1/1/2008. Aero
appropriately used the cost method of accounting for its investment. Aero purchased an additional 25% of Bert's common stock on 1/1/2010 for $190,000 which was also
equal to its share of book value at that date. Aero can now exercise significant influence over the operating and financial policies of Bert. The total net income and
dividends of Bert are as follows:
Year
2008
$20,000
$30,000
$50,000
Based on the information given above, the amount of income that Aero would report on its income statement related to its investment in Bert for 2008 is:
2009
Net Income
2010
$50,000
$75,000
$100,000
Dividends
1.$0
2. $3,000
3. $7,500
4. $6,500
5. None of the above

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