On April 1, 2024, BigBen Company acquired 30% of the shares of LittleTick, Incorporated BigBen paid $100,000 for investment, which is $40,000 more than 30% of the book value of LittleTick's identifiable net assets. BigBen attribute $15,000 of the $40,000 difference to inventory that will be sold in the remainder of 2024, and the rest to goodwill. LittleTick recognized a total of $20,000 of net income for 2024, and paid total dividends for the year of $10,000; thes dividends were issued quarterly. BigBen's investment in LittleTick will affect BigBen's 2024 net income by: O a loss of $10,500. O earnings of $4,500. O earnings of $1,125. O earnings of $3,450.

On April 1, 2024, BigBen Company acquired 30% of the shares of LittleTick, Incorporated BigBen paid $100,000 for investment, which is $40,000 more than 30% of the book value of LittleTick's identifiable net assets. BigBen attribute $15,000 of the $40,000 difference to inventory that will be sold in the remainder of 2024, and the rest to goodwill. LittleTick recognized a total of $20,000 of net income for 2024, and paid total dividends for the year of $10,000; thes dividends were issued quarterly. BigBen's investment in LittleTick will affect BigBen's 2024 net income by: O a loss of $10,500. O earnings of $4,500. O earnings of $1,125. O earnings of $3,450.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Fredo, Incorporated, purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2024. Sonny recognized a total of $310,000 net income during 2024, paid $21,000 of dividends to Fredo during 2024, and at December 31,2024, the market value of the Sonny investment increased to $1,031,000. Required: Prepare the journal entries necessary to account for the Sonny investment, assuming that Fredo (1) does not have significant influence or (2) does have significant influence over the operating and financial policies of the investee. Complete this question by entering your answers in the tabs below. Prepare the journal entries necessary to account for the Sonny investment, assuming that Fredo lacks significant influence.
Sansa Co. acquired 60% interest in Arya on January 1, 2025 for $46,800 when Arya's net assets had a book value equal to its fair value of $79,000. On the same year, Sansa sold inventory items costing $78,000 to Arya for $104,000 and Arya's inventory at December 31, 2025 included one-fourth of this merchandise. Sansa reported separate income from its own operations of $48,800, and Arya reported a net loss of $19,500 for the year. Compute for the consolidated net income,2025.
On January 1, 2024, Hokie Company paid $200,000 to purchase 25% of Cavalier Company. This investment allowed Hokie Company to hold significant influence over Cavalier's operations. Cavalier reported total 2024 net income of $40,000, other comprehensive income of $3,000, and dividends of $8,000. The fair value of Hokie's investment in Cavalier Company at 12/31/2024 was $220,000. Based on the above information, use the dropdown lists to answer the following questions: 1. The investment balance at 12/31/2024 is: $212,750 2. The equity income balance on the income statement for the year ended 12/31/2024 is: $10,000 3. The equity income balance in other comprehensive income for the year ended 12/31/2024 is: 750
On January 1, 2023, Stream Company acquired 20 percent of the outstanding voting shares of Q-Video, Incorporated, for $774,000. Q- Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $2.2 million and $658,000, respectively. A customer list compiled by Q-Video had an appraised value of $360,000, although it was not recorded on its books. The expected remaining life of the customer list was five years with straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill. Q-Video generated net income of $316,000 in 2023 and a net loss of $130,000 in 2024. In each of these two years, Q-Video declared and paid a cash dividend of $18,000 to its stockholders. During 2023, Q-Video sold inventory that had an original cost of $84,000 to Stream for $150,000. Of this balance, $75,000 was resold to outsiders during 2023, and the…
Gino Company acquired 30% of ABC Corporations share for P8,000,000 on July 1, 2020. ABCCorporation’s identifiable net assets on the date of acquisition are P20,000,000. Gino believes thatthe investee has known goodwill and the fair value of the corporation's net assets is the same as itscarrying amount except for the following: a. Equipment is undervalued by P2,000,000.b. Inventory’s fair value is P2,000,000 greater than its carrying amount. The equipment has a remaining life of 4 years and depreciated using the straight-line method. At theend of 2020, all inventories at the acquisition date are entirely sold.On November 30, ABC Corporation pays a P2,000,000 dividend to its shareholders. During the year,ABC Corporation reported a net income of P5,000,000, 40% of these were earned in the first half ofthe year. The fair value of ABC Corporation's shares held by Gino at the end of 2020 is P8,250,000.Requirements:1. Prepare the necessary journal entries to record the above transactions.2.…
On July 1, 2024, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $136 million cash, giving Gupta the ability to exercise significant influence over VB's operations. At the date of acquisition of the stock, VB's net assets had a total fair value of $494 million and a book value of $256 million. Of the $238 million difference, $56 million was attributable to the appreciated value of inventory that was sold during the last half of 2024, $80 million was attributable to buildings that had a remaining depreciable life of 10 years, and $102 million related to equipment that had a remaining depreciable life of five years. Between July 1, 2024, and December 31, 2024, VB earned net income of $72 million and declared and paid cash dividends of $42 million. Required: 1. Prepare all appropriate journal entries related to the investment during 2024, assuming Gupta accounts for this investment by the equity method. 2. Determine the amounts to be reported by Gupta.…
On January 3, 2023, Trycker, Incorporated acquired 40% of the outstanding common stock of Inkblot Company for $2,400,000. This investment gave Trycker the ability to exercise significant influence over Inkblot. Inkblot's assets on that date were recorded at $8,000,000 with liabilities of $2,000,000. There were no other differences between book and fair values. During 2023, Inkblot reported net income of $500,000 and paid dividends of $300,000. The fair value of Inkblot at December 31, 2023, is $7,000,000. Trycker elects the fair value option for its investment in Inkblot. How are dividends received from Inkblot reflected in Trycker's accounting records for 2023?
On July 1, 2024, Gupta Corporation bought 25% of the outstanding common stock of VB Company for $104 million cash, giving Gupta the ability to exercise significant influence over VB’s operations. At the date of acquisition of the stock, VB’s net assets had a total fair value of $366 million and a book value of $224 million. Of the $142 million difference, $24 million was attributable to the appreciated value of inventory that was sold during the last half of 2024, $80 million was attributable to buildings that had a remaining depreciable life of 10 years, and $38 million related to equipment that had a remaining depreciable life of five years. Between July 1, 2024, and December 31, 2024, VB earned net income of $32 million and declared and paid cash dividends of $26 million. Required: Prepare all appropriate journal entries related to the investment during 2024, assuming Gupta accounts for this investment by the equity method. Determine the amounts to be reported by Gupta.
BuyCo, Inc., holds 28 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 $12,000 per year. For 2020, Marqueen reported earnings of $119,000 and declares cash dividends of $34,000. During that year, Marqueen acquired inventory for $60,000, which it then sold to BuyCo for $75,000. At the end of 2020, BuyCo continued to hold merchandise with a transfer price of $27,000. What Equity in Investee Income should BuyCo report for 2020? How will the intra-entity transfer affect BuyCo’s reporting in 2021? If BuyCo had sold the inventory to Marqueen, would the answers to (a) and (b) have changed? Equity in investee income $19,052selected answer incorrect b. Equity accrual for 2021 will be increasedselected answer correct by $2,117selected answer incorrect c. If BuyCo had sold the inventory to Marqueen, would your answers above…
Paul Company acquired 60% of Smith Company for $480,000 on January 1, 2019. On that date the remaining 40% of Smith’s shares had a fair value of $320,000; and Smith’s balance sheet showed $310,000 of contributed capital and $240,000 of retained earnings. At that time, Smith’s equipment was overvalued by $40,000 and buildings were undervalued by $90,000, both having a 10-year remaining life. Any excess consideration transferred over the fair value of Smith’s net assets was attributed to goodwill. Smith reported net income of $170,000 and dividends declared of $70,000 for the year 2020 and retained earnings of $320,000 at the beginning of 2020. Paul’s operating income of 2020 was $480,000. At the end of 2020, the Equipment (net) account in Paul’s and Smith’s books were $260,000 and 132,000, respectively. Required: Assume Paul uses the partial equity method. Calculate the following: 1. Goodwill, 12/31/20: ____________ 2. Paul’s net income, 2020: ____________ 3. Consolidated net…
Please help me
On January 2, 2019, Upo Co. purchased 75% of the outstanding shares of Napa Co. resulting to a goodwill of P60,000. On that date, the non-cash assets of Napa Co. whose book values did not equal their book values were accounts receivable which was overstated by P4,500 and equipment with a remaining 5 year life on the purchase date which was understated by P50,000. For the year 2010, Upo and Napa reported net income of P350,000 and P200,000 each respectively. Upo’s beginning inventory included merchandise purchased from Napa Company amounting to P39,000 which was sold to them by Napa at a 30% markup, 80% of these goods were sold during the year. Napa, on the other hand, included inventory items which they purchased from Upo Co. amounting to 18,000. These goods were sold by Upo at a 25% markup. 90% of these goods were sold by Napa for the year.What is the Noncontrolling interest's share in the Net income of the subsidiary?