On December 31, 2022, Akron, Incorporated, purchased 5 percent of Zip Company's common shares on the open market in exchange for $16,250. On December 31, 2023, Akron, Incorporated, acquires an additional 25 percent of Zip Company's outstanding common stock for $95,000. During the next two years, the following information is available for Zip Company: Year 2022 2023 2024 Income $ 82,000 94,000 Dividends Common Stock Fair Declared Value (12/31) $ 7,400 14,800 $325,000 190,000 477,000 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?

On December 31, 2022, Akron, Incorporated, purchased 5 percent of Zip Company's common shares on the open market in exchange for $16,250. On December 31, 2023, Akron, Incorporated, acquires an additional 25 percent of Zip Company's outstanding common stock for $95,000. During the next two years, the following information is available for Zip Company: Year 2022 2023 2024 Income $ 82,000 94,000 Dividends Common Stock Fair Declared Value (12/31) $ 7,400 14,800 $325,000 190,000 477,000 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?

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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