On January 1, 2024, Hokie Company paid $200,000 to purchase 25% ofCavalier Company. This investment allowed Hokie Company to holdsignificant influence over Cavalier's operations. Cavalier reported total 2024net income of $40,000, other comprehensive income of $3,000, anddividends of $8,000. The fair value of Hokie's investment in CavalierCompany at 12/31/2024 was $220,000.Based on the above information, use the dropdown lists to answer thefollowing questions:1. The investment balance at 12/31/2024 is:$212,7502. The equity income balance on the income statement for the year ended12/31/2024 is: $10,0003. The equity income balance in other comprehensive income for the yearended 12/31/2024 is: 750

A holding company is a parent company — usually a corporation or LLC — that is created to buy and…

Answered: On January 1, 2024, H

Business

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On January 1, 2024, H

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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Concept explainers

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.

Question

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

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