On December 31, 2022, Akron, Incorporated, purchased 5 percent of Zip Company's common shares on the open market in exchange for $15,700. On December 31, 2023, Akron, Incorporated, acquires an additional 25 percent of Zip Company's outstanding common stock for $96,500. During the next two years, the following information is available for Zip Company: Common Stock Fair Value (12/31) $ 314,000 386,000 489,000 Year 2022 2023 2024 Income $ 74,000 86,000 Dividends Declared $6,000 14,700 At December 31, 2023, Zip reports a net book value of $294,000. Akron attributed any excess of its 30 percent share of Zip's fair over book value to its share of Zip's franchise agreements. The franchise agreements had a remaining life of 10 years at December 31, 2023. Required: a. Assume Akron applies the equity method to its Investment in Zip account: 1. What amount of equity income should Akron report for 2024? 2. On Akron's December 31, 2024, balance sheet, what amount is reported for the Investment in Zip account? b. Assume Akron uses fair-value accounting for its Investment in Zip account: 1. What amount of income from its investment in Zip should Akron report for 2024? 2. On Akron's December 31, 2024, balance sheet, what amount is reported for the Investment in Zip account?

Q: On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the open…

A: According to the question given, we need to compute the income to be reported, and the value of the…

Q: On January 1, 2025, Pina Company paid $765000 for 102000 Blossom Company's outstanding common stock,…

A: To determine the value at which Pina Company should report its investment in Blossom Company on its…

Q: On December 31, 2016, Akron, Inc. purchased 5 Percent of Zip’s Company's common shares on the open…

A: Given Information:

Q: On January 1, 2020 GGB ltd. Had 2,500,000 Class A common shares outstanding. On April 1, the company…

A: Earning per share is the calculation of the earnings of the company attributable to each share of…

Q: An investor company purchased 42,000 of the 100,000 outstanding shares of the investee company's…

A: Equity method is a method of accounting for investments. This method is used when investor has…

Q: Pharoah Company purchased 200 of the 1000 outstanding shares of Sheridan Company's common stock for…

A: The balance in equity investment refers to the value of an investment in a company's stock or…

Q: On June 1, 2022, Madison Corporation purchased 100,000 shares of Steller, Inc., common stock for…

A: When a company acquires another company by purchasing the majority of shares, in such case the…

Q: The Parent Company purchased common stock of Sub Company in a series of open-market purchases in…

A: INTRODUCTION: Common stock is what most people see when they consider "stock." All of the shares in…

Q: On January 1, 2020, Pail Corporation acquired 75 percent of Sand Company's common stock for $525,000…

A: The question is related to Consolidated Financial Statements.The details of dividend paid by Parent…

Q: On July 1, 2024, Clearwater Incorporated purchased 9,300 shares of the outstanding common stock of…

A: Journal entry:The recording of day-to-day business transactions in a journal or books of account is…

Q: On January 1, 2024, the Moody Company entered into a transaction for 100% of the outstanding common…

A: The amount to be recorded as an investment in a corporate entity to acquire 100% is based on the…

Q: On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the open…

A: Under the equity method, the investor initially records the investment at cost and subsequently…

Q: On March 31, 2024, Chow Brothers, Incorporated, bought 6% of KT Manufacturing's capital stock for…

A: The objective of the question is to prepare the journal entries for the investment made by Chow…

Q: Sonic Enterprises Inc. has decided to purchase 100% of the voting shares of Jackson Inc. for…

A: Goodwill is arises when amount of total net assets acquired is lower than total of liabilities taken…

Q: On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company's common shares on the oper…

A: Investment in Associates and Joint venture and Subsidiary Equity Accounting method - This method is…

Q: Sheridan Corporation purchased 43020 shares of common stock of the Splish Corporation for $50 per…

A: The possibility for financial gains is one of the main justifications for investing in another…

Q: On March 1, 2023, Forrest Inc. issued 50,000 voting common shares in return for all the common…

A: The cost of investment includes the cash transferred, fair value of assets transferred, fair value…

Q: On Jan. 1, 2023 Apex Company purchases 30,000 shares of the common stock of Cary Industries for…

A: Under equity method of investment, investor company records investment at cost and then the…

Q: M.T. Glass, Inc. purchased the following investments on January 1, 2028: 1. 21,000 shares…

A: Introduction:If an investor company makes an investment between 20 to 50% in the investee company…

Q: Following is a list of investments owned by Ivanhoe Ltd., as of the company’s year-end, December 31,…

A: The fair value (FV) method for recording the investment-related transaction made the corporation…

Q: At the beginning of 2022, Rose, Inc. purchased 8000 ordinary shares of Mark, Inc. for $800,000. The…

A: Investment in  shares can be accounted as per fvpl or fvocl

Q: Clark Company acquired 15% of the 500,000 shares of common stock of Davis Company at a total cost of…

A: When something happens in a business and it can be quantified and stated in monetary terms, it…

Q: On January 23, 2019, Happy Construction repurchases 275,000 shares of its outstanding common stock…

A: Journal entries are the primary reporting of the business transactions in the books of accounts.…

Q: On March 22, 2023, Amelia, Inc., purchased 500 shares of its own common stock in the market for $21…

A: Treasury stock are shares that were repurchased by a company in a share buyback.Purchase of treasury…

Q: On February 1, 2019, Wild Bill Corporation repurchases 810 shares of its outstanding common stock…

A: Treasury Stock: It refers to the shares that are reacquired by the corporation that are already…

Q: On July 1, 2020, Selig Company purchased for cash 30% of the outstanding common stock of Spoor…

A: Equity method: Most common accounting technique used by the organization to get the access on…

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.