On January 1, 20X1, Peace, Inc., acquired 70 percent of Silver's outstanding voting stock. No excess fair-value amortization resulted from the acquisition. On January 1, 20X1, Peace sold equipment to Silver for $20,000. This asset originally cost $32,000 but had a January 1, 20X1, book value of $16,000. At the time of transfer, the equipment's remaining life was estimated to be four years. Silver reported net income of $150,000 for year 20X1. Assume Peace applied equity method to account for this investment. Compute the amount of Income from Silver Peace would record in its internal record for year 20X1: $102,000 $104,000 $105,000 $101,000 *THE ANSWER IS NOT 105,000
On January 1, 20X1, Peace, Inc., acquired 70 percent of Silver's outstanding voting stock. No excess fair-value amortization resulted from the acquisition.
On January 1, 20X1, Peace sold equipment to Silver for $20,000. This asset originally cost $32,000 but had a January 1, 20X1, book value of $16,000. At the time of transfer, the equipment's remaining life was estimated to be four years. Silver reported net income of $150,000 for year 20X1. Assume Peace applied equity method to account for this investment. Compute the amount of Income from Silver Peace would record in its internal record for year 20X1:
The equity accounting method is used for accounting of investments in associates and joint ventures. This method accounts for a significant influence over the investee. Say for example X company purchases 25% equity in Y limited. In this case, X limited does not fully control the Y limited, it records its purchase consideration as an investment in Y limited.
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