On January 1, 2023. Stream Company acquired 21 percent of the outstar Video manufactures specialty cables for computer monitors. On that date $2.6 million and $768,000, respectively. A customer list compiled by Q-W recorded on its books. The expected remaining life of the customer list w appropriate. Any remaining excess cost was not identifiable with any par Q-Video generated net income of $284,000 in 2023 and a net loss of $1 and paid a cash dividend of $10,000 to its stockholders During 2023, Q-Video sold inventory that had an original cost of $80,000 to outsiders during 2023, and the remainder was sold during 2024. In 20
On January 1, 2023. Stream Company acquired 21 percent of the outstar Video manufactures specialty cables for computer monitors. On that date $2.6 million and $768,000, respectively. A customer list compiled by Q-W recorded on its books. The expected remaining life of the customer list w appropriate. Any remaining excess cost was not identifiable with any par Q-Video generated net income of $284,000 in 2023 and a net loss of $1 and paid a cash dividend of $10,000 to its stockholders During 2023, Q-Video sold inventory that had an original cost of $80,000 to outsiders during 2023, and the remainder was sold during 2024. In 20
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2023, Stream Company acquired 21 percent of the outstanding voting shares of Q-Video, Incorporated, for $718,000. Q-
Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of
$2.6 million and $768,000, respectively. A customer list compiled by Q-Video had an appraised value of $312,000, although it was not
recorded on its books. The expected remaining life of the customer list was six 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 $284,000 in 2023 and a net loss of $108,000 in 2024 In each of these two years, Q-Video declared
and paid a cash dividend of $10,000 to its stockholders
During 2023, Q-Video sold inventory that had an original cost of $80,000 to Stream for $160,000. Of this balance, $77,000 was resold
to outsiders during 2023, and the remainder was sold during 2024. In 2024, Q-Video sold inventory to Stream for $180,000. This
inventory had cost only $144,000. Stream resold $98,000 of the inventory during 2024 and the rest during 2025
Required:
For 2023 and then for 2024, compute the amount that Stream should report as income from its investment in Q-Video in its external
financial statements under the equity method.
Note: Enter your answers in whole dollars and not in millions.
2023 Equity income of
2024 Equity loss
of
Expert Solution
Step 1: Introduction
The equity method on the investor's financial statements provides a more precise representation of the investor's investment and its share of the investee's financial performance, allowing stakeholders to better understand the economic impact of the investment on the investor's overall financial position and results of operations.
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